Furlough Scheme – HMRC ramps up compliance activity

15 Sep 2020

As the furlough scheme continues to wind down towards its final finish date of 31 October HMRC have started to review and identify those furlough claims which they believe may contain errors.  Overall HMRC believes between 5% and 10% of grants under the scheme contain mistakes or in a worst case scenario have been made fraudulently.  At the extreme end of the scale HMRC have already received something in excess of 8,000 calls to their furlough whistleblowers’ hotline and there have been arrests made in at least one case of suspected fraud.  Clearly this is very much the exception rather than the rule but also underlines how seriously HMRC is taking compliance with the furlough rules.   

As anyone who claimed under the scheme will know, the guidance on what employers where able to claim evolved rapidly and continually throughout the early stages of the scheme.  Inevitably therefore many of the perceived errors in claims will have arisen where employers have genuinely tried their best to get the claim right but there was simply too much information in too short a time for them to be able to taken on board and action. 

Recognising this, HMRC has said it will focus on what it believes to be fraudulent claims and not on cases where the employer has made an innocent error.  In reality however it is likely that many employers who have acted entirely in good faith will still receive one of these enquiry letters.  At this stage HMRC have identified 27,000 claims where they consider there may be errors and they initially writing to employers to enquire into around 11,000 claims.   

What does the letter say?

The HMRC compliance letter says the employer’s claim appears to be incorrect because, for example, ineligible employees were included, or too much was claimed for some other reason. No details are given of how much the over claim may be or who the potential ineligible employees are.  This is clearly very unhelpful to those employers who have tried their best to get the claim right and have either made an innocent error or indeed the claim is correct but HMRC are not in full possession of the facts.  Either way the lack of specific information means employers receiving the letter will need to review all of their claims to identify any areas where things may have gone wrong.   

What action should employers take?

The letter asks the employer to contact HMRC by phone if they believe their claim is in fact correct, or by email if they believe they have identified errors.  The timescale for responding is short so quick action is required.  Either way, if an employer receives a letter enquiring into a claim we would strongly recommend they take professional advice before proceeding – WR Partners can assist in reviewing any claims to see if there are any potential errors and in advising how to respond to HMRC.  Depending on the precise nature of the enquiries from HMRC it may also be that those clients who have taken out fee protection insurance through WR Partners will be covered for any professional costs we incur on their behalf in assisting with the enquiry. 

Voluntary disclosures

Even if an employer has not received a letter from HMRC it may be that they realise they have made errors in their claims which may have resulted in an over claim.  If this is the case there is a voluntary facility to allow employers to disclose the error to HMRC and avoid any potential financial penalties.  The deadlines for notifying HMRC are the latest of either:

  • 90 days after the date the employer received the grant they were not entitled to

  • 90 days after the date the employer received the grant that they were no longer entitled to keep because your circumstances changed

  • 20 October 2020

If as an employer you receive one of the HMRC letters in respect of your furlough claims, or you think you may have made errors in your claims, please speak to your usual WR Partners contact as soon as possible to discuss how we may be able to assist. 

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