The main headline from the 2021 Budget to catch the eye of employment solicitors was the announcement that the Coronavirus Job Retention Scheme (CJRS), also known as the ‘furlough scheme’, will be extended until the end of September 2021. With somewhat less fanfare, Rishi Sunak also announced the creation of a taskforce to tackle furlough scheme fraud which could, potentially, have an even bigger impact on employers.
The Chancellor’s concern about potential exploitation is unsurprising given the government’s own estimate that up to £3.5 billion in furlough payments and other Covid-related financial support has been claimed fraudulently or paid out in error.
A significant £100 million investment in HMRC’s Taxpayer Protection Taskforce is expected to fund the recruitment of over 1,000 new inspectors to investigate those businesses which have deliberately sought to defraud the government’s support initiatives or may have overclaimed in error.
The upshot of this is that all employers who have accessed the furlough scheme need to check and make sure that they have complied with their obligations to keep accurate records and use furlough payments correctly. It is worth preparing for an inspection as the message is clear that misuse will be investigated, and penalties will be issued. To make HMRC’s job easier, the government has already set up a Covid Fraud Hotline where suspected fraudulent activity can be reported anonymously.
It is likely that many employers who claimed in good faith yet made mistakes with the application process or compliance requirements will be investigated, as has been the case with HMRC’s enforcement of the National Minimum Wage. Currently an employer may have to pay a penalty if they have overclaimed a grant and have not repaid it, or notified HMRC by the latest of either:
- 90 days after the date they received the grant they were not entitled to; or
- 90 days after the date they received the grant that they were no longer entitled to keep because their circumstances changed.
Given that at the scheme’s peak as many as 9 million people were furloughed, there is the potential for this to affect a lot of employers. It is therefore worth reviewing employers’ obligations under the scheme.
- Employers must ensure that they have confirmed with their employees in writing that they have been furloughed and keep a written record of their agreement for five years. Separate agreements should be in place for each distinct period of furlough or flexible furlough;
- Employers must keep the following records for each furloughed employee for 6 years:
a. The amounts claimed and the period(s) over which furlough pay was claimed;
b. The claim reference numbers;
c. Their furlough pay calculations (in case HMRC require more information about a claim);
d. The employee’s usual hours worked; and
e. The actual hours worked for employees flexibly furloughed.
I really recommend that all employers who have used the furlough scheme undertake a review of their record keeping sooner rather than later and consider carrying out a risk assessment in order to make sure that they are prepared should they be contacted by a member of HMRC’s Taxpayer Protection Taskforce.