As previously reported, the Coronavirus Job Retention Scheme (CJRS) is designed to support employers whose operations have been affected by the coronavirus (COVID-19) pandemic.
We know that the scheme will be available to employers for a total of eight months, from March through to October 2020. Over recent weeks and months there have been a significant number of important updates to HMRC’s guidance, and information relating to HMRCs compliance regime. It is essential that employers familiarise themselves with the very latest guidance to ensure that they understand the changes and continue to meet the eligibility criteria.
On Wednesday 22 July 2020 the Finance Act received Royal Assent containing details regarding the penalty regime which will apply to employers who submit incorrect CJRS claims. Schedule 16 of the Finance Act 2020 sets out how coronavirus support payments will be taxed.
HMRC now has powers to recover amounts that have been paid to employers to which they are not entitled or did not use to pay furloughed employee costs. If an employer has over claimed a grant and has not repaid it, they must notify HMRC by the latest of either:
On 28 July 2020 HMRC published a factsheet detailing the penalty regime which will apply to overpayments. They also confirmed they will not actively seek out and penalise innocent errors. The law treats any person who knowingly failed to notify HMRC of an incorrect claim within the notification period as making a ‘deliberate and concealed’ failure, with penalties of up to 100%.
We recognise that many of our clients and others had to calculate and apply for these grants in exceptional circumstances and therefore there may be errors as a result of misunderstandings.
The Chancellor announced as part of the Summer Economic update that a one off payment of £1,000 per furloughed employee if the employee in question is brought off furlough and remains in employment through to the end of January 2021. The bonus is available for any employee who was previously furloughed and included within a valid CJRS claim and earning above the Lower Earnings Limit for National Insurance. The payment itself can be claimed from February 2021, it will be taxable and should be included on a businesses Corporation or Self Assessment tax return.
It will be important for employers to ensure that all employee and payroll details are accurate and up to date. Inaccurate or incorrect CJRS claims which are not subsequently amended within the guidelines stated under HMRC’s compliance regime, may invalidate a claim for the bonus.
1 September 2020 - From 1 September the Government will pay 70% of wages up to a monthly cap of £2,187.50 for the usual hours the employee does not work. Employers will continue to pay employer NICs and pension contributions plus 10% of wages to make up the total of 80%; up to a cap of £2,500.
From October 2020 - the Government will pay 60% of wages up to a monthly cap of £1,875 for the usual hours the employee does not work. Employers will pay employer NICs and pension contributions plus 20% of wages to make up the 80% total; up to a cap of £2,500.
The Chancellor has confirmed his current position that all forms of the scheme will cease at the end of October 2020.
It’s important for businesses to note that even through the introduction of the flexible furlough option, an employee cannot work for the employer (or another linked or associated company) throughout the period of furlough. ‘Voluntary work’ for the employer would also breach the terms of furlough.
From 31 July 2020 new legislation was implemented to ensure that employees who benefitted from CJRS do not lose out on certain entitlements. The legislation is designed to ensure that a number of statutory rights including redundancy pay, notice pay and compensation for unfair dismissal are based on their ‘normal’ wage, rather than their furlough pay.
In order to evidence eligibility for the support measures, compliance and accuracy of the claim calculations (with evidence trails for computations), employers must retain permanent records for up to six years.
HMRC and the Government have released a number of materials on this topic which are available to all and since its launch, HMRC have regularly updated and refined their guidance to help employers accurately calculate their claims under the scheme. This has been a complex and challenging undertaking for many employers and will continue to be so with the changes from 1 July and subsequent periods.
If you have concerns about how to navigate through this complexity, an independent review of the approach that you have adopted for your CJRS grant claims will determine whether the methodology and basis for your claim is accurate. We can support you where needed, whether you are concerned about the eligibility criteria, the specifics of your calculations in each pay period or the legal positions that you have adopted.