The CJRS allows you to claim up to 80% of the cost of employees’ wages, employer’s NIC plus automatic enrolment pension contributions based on the employees’ wages when you are furloughing staff. Make sure you use the furlough monies to meet only these costs or you could commit furlough fraud or be accused of abusing the scheme.
When claiming for your furloughed employee under the coronavirus job retention scheme or CJRS, it is vital to avoid furlough fraud schemes. Under the Finance Act 2020, furlough fraud will lead to you having to repay 100% of the furlough payments plus a penalty of 100% of the amounts received. You might even be prosecuted under the Fraud Act 2006 for claiming furlough payments dishonestly.
If you are in any doubt about whether you may have broken the CJRS rules seek advice as soon as possible to reduce the risk of a 100% penalty.
Upcoming changes to the CJRS – be careful that you follow the furlough rules.
The CJRS closes on 31 October 2020.
From 1 July, employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked.
From 1 August 2020, the level of grant will be reduced each month. To be eligible for the grant employers must pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they are being furloughed.
Wage caps are proportional to the hours an employee is furloughed. For example, an employee is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours.
In June and July, the government pays 80% of wages up to a cap of £2,500 for the hours the employee is on furlough, as well as employer’s National Insurance Contributions and pension contributions for the hours the employee is on furlough. Employers will have to pay employees for the hours they work.
In August, the government pays 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay employer’s NICs and pension contributions for the hours the employee is on furlough.
In September, the government pays 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay employer’s NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
In October, the government pays 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay employer’s NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
Claiming for employees who are required to work
Before 1 July 2020 under the furlough scheme the furloughed employee cannot have done any work for their employer. This is emphasised by the Treasury Direction under Sections 71 and 76 of the Coronavirus Act 2020 issued on 22 May 2020 which provides that the training activities a furloughed employee can undertake while on furlough must not provide a service to the employer, nor can they contribute to the business activities or generate income or profit for the employer. They must however be relevant to the employee’s employment. Employees can continue, or start, to work or to volunteer for unconnected organisations.
From 1 July, employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked.
If your furloughed employees did any work before 1 July 2020 or since then, you have claimed for hours actually worked then you may have committed furlough fraud and need to take advice.
Claiming the wrong amount
For example, an employee is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours. But if you continue to claim 80% you may have committed furlough fraud and should take advice.
Not using the Grant to pay Employees’ Costs
Some of the commonest types of furlough fraud are not using the furlough payments to meet the costs of employing furloughed workers, not paying employees the full amount or claiming for “ghost” employees. If you do any of these you are likely to be investigated for furlough fraud and should seek advice about what to do.
Amending mistakes
Under the legislation, companies who have claimed furlough based on dishonest or inaccurate information will face penalties or criminal action. The civil penalties are 100% of the amount not used for employees’ costs. There is also a requirement to notify HMRC within 90 days of the non-entitlement to the COVID-19 payment and a separate penalty for failure to notify if the person knew they were not entitled to the payment. Added to this are powers for HMRC to make the directors of an insolvent company personally liable for the CJRS penalties if their company fails to pay.
Therefore, you need to report the situation to HMRC within 90 days or face a 100% penalty.
Where you have already made a final CJRS claim, you need to repay the over-claimed amount direct to HMRC. To do this you or your tax agent must first call the HMRC reporting service coronavirus technical line: 080 0024 1222, and request a payment reference number, which will being with X. This must be used for the transaction reference when repaying and HMRC state that this repayment can only be made electronically.
Examples of Furlough Fraud
- Furloughing staff but asking them to continue to work from home or ‘volunteer’ unpaid or work from home.
- Furloughing staff without telling them.
- Claiming furlough money for a ‘ghost’ employee. This could be someone who had been dismissed prior to 19 March 2020, or for a non-existent employee who was ‘recruited’ after 19 March.
- Making backdated claims for a period when an employee was working.
- Not paying furloughed staff the full amount that they are owed under the scheme.
Get help
If you or your company are facing an HMRC furlough fraud investigation, or you are reporting your employer because your employer might be abusing the furlough scheme, Patrick may be able to advise and assist you. Please contact him here for an initial discussion
Alongside this, Patrick Cannon can advise and represent individuals on:
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For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.
