The government’s Job Retention Scheme (JRS) ends on 30 September and employers will need to decide if they are to bring staff back from furlough or to let them go. Businesses need also to keep a watchful eye on furlough claims, with HMRC stepping up its activity where abuse of the support is expected.
Businesses across the country have started to receive nudge letters from HMRC that suggests errors have been made. They should not, says Kevin Hayhoe, be ignored.
The Job Retention Scheme has, since April 2020 seen over 11.6 million jobs from 1.3 million employers furloughed, costing the government an estimated £100bn. As of July 2021, 1.6 million people remained on the furlough scheme, with that number falling as the economy reopens. It will end on 30 September 2021.
The Job Retention Scheme was introduced at great speed and has been a valued by businesses across the country. Guidance was, however, open to interpretation and frequently changed. With unclear or ambiguous guidance, it is easy to see how a business might inadvertently have fallen foul of the rules.
Take, for example, a business that had furloughed all its staff including its directors and then faced an employment dispute. The furlough scheme guidelines allowed a director to continue to meet their statutory duties of a business as a director but is unclear whether managing an employment dispute would be considered a statutory duty or normal work and therefore be in breach of the furlough scheme.
The furlough scheme on its introduction required staff to be furloughed for a three-week window. If staff checked emails or answered work related phone calls, furlough payments could be voided for a total of three weeks either side, a point that was often not fully realised by business owners. In fact, an employee furloughed for five weeks and who, in HMRC’s judgement, did some work in the middle of that period might be excluded for the entire five weeks, as there could be no clear three-week period without work.
HMRC nudge letters
HMRC is sending letters to businesses that suggest that errors have been made. It is also likely that HMRC will take a keen interest in the accounts of family-owned and managed businesses. They will look at profitability and turnover, with concerns triggered if figures remain consistent with pre-Covid years. For example, if profitability or turnover remain consistent, HMRC may ask whether the business really did have their workforce furloughed? Businesses with a high staff turnover are also likely to be in HMRC’s spotlight.
Whilst these letters do not point a finger of blame, they should not be ignored.
Businesses are advised to check furlough claims for mistakes and turn to their accountant for support in reviewing those claims – errors are not always obvious.
Penalties and charges are often considerably less if a business approaches HMRC looking to redress genuine errors than if ignored.
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