HMRC’s updated response to furlough claim errors - Kuits Solicitors Manchester
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HMRC’s updated response to furlough claim errors

HMRC’s updated response to furlough claim errors

31st October 2022 - Published by The Employment Team

HMRC have published ‘Common errors in the calculation of CJRS grants questions and answers’.

The purpose of this is to give an indication of HMRC’s approach to businesses who calculated their furlough grants differently to the method set out in HMRC guidance. Helpfully it sets out when businesses do and do not need to correct specific types of errors.

In summary, furlough claim errors must be paid back where employers:

  • have not taken reasonable care in following HMRC guidance available at the time of the claim. This applies even if the mistakes were not deliberate;
  • did not calculate furlough pay for variably paid workers based on the higher of a) the employee’s average pay; and b) their pay in the corresponding calendar period in the previous year;
  • calculated furlough pay for workers that receive an annual salary but have significant additional variable elements to their pay (e.g. overtime, commission, shift payments) on their fixed salary if the claim was made on or after 1 September 2020;

however, furlough claim errors do not need to be paid back where employers:

  • acted on incorrect HMRC advice provided they gave honest answers to HMRC, and they can evidence they were given unambiguous advice by HMRC;
  • used a different method to HMRC’s preferred method for calculating reference pay provided it is consistent with HMRC guidance at the time of the claim; and
  • calculated furlough pay for workers that receive an annual salary but have significant additional variable elements to their pay (e.g. overtime, commission, shift payments) on their fixed salary if the claim was made prior to 1 September 2020. This is because the guidance about this changed in August 2020.

How is this updated response helpful for employers?

Now that we have certainty from HMRC about their approach to specific furlough claim errors, all employers should review their use of the scheme in-light of this new guidance.

A review of furlough claims will also enable businesses to respond robustly and succinctly to employee grievances on this point by confirming that claims are being reviewed with the intent that any errors or misuse will be corrected directly with HMRC, and/or confirming to the employee that the review does not indicate that any correction is necessary based on HMRC’s guidance.

If any errors are identified, it is crucial that a pro-active approach is taken and contact made with HMRC to make it aware of the error and re-pay the money claimed in error. A failure to disclose any known errors could result in businesses being named and shamed and fined. In some cases, it can even result in directors being individually sanctioned.

How can we help?

If an employee has raised a complaint about the company’s misuse of the furlough scheme it must be dealt with promptly and comprehensively. We can help you investigate and respond to the complaint in a constructive and measured manner to prevent the complaint from escalating and potentially resulting in a whistleblowing claim. In our experience where one employee raises a complaint about the company’s misuse of the furlough scheme this can sometimes have a domino effect amongst the rest of the workforce. Therefore, it is imperative that a complaint of this nature is dealt with swiftly.

If you identify any errors, are unsure if your business has committed any errors, or have received communications from HMRC about your potential misuse of the scheme then our furlough investigation team at Kuits will be able to help you – please click here. Our furlough experts have experience investigating whether there has been a misuse of the furlough scheme and if they identify a misuse will be able to advise you on how best to approach this in order to minimise the penalties.

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