Legislation is currently being fast-tracked to allow HMRC to reclaim any furlough money overpaid to employers, or not spent on wages as intended. Although we do not have the final version of the legislation, employers should start addressing their minds to the claims they have made to date as soon as possible.
One would think the 2000+ employers already reported to whistleblowing hotlines for furlough fraud will be at the top of HMRC’s hitlist for investigations, but given the mass scale of furlough, it is likely these targeted investigations will be followed by random compliance checks across the board.
The draft legislation talks of ‘deliberately’ making an incorrect claim or ‘deliberately’ not using the money to pay furloughed employee costs. This should give some reassurance to businesses who made an effort to understand the rules of the scheme, but may inadvertently have submitted a claim incorrectly, or got their numbers wrong.
While guidance and updates to the Coronavirus Job Retention Scheme have regularly been updated, what was crystal clear from the outset was that if employers took advantage of this scheme, they could not allow that employee to do any work at all for them, and this remains the case until the new Flexible Furlough comes into operation on 1 July. Therefore, any findings that an employer has asked the employee to carry out work will inevitably lead to sanctions under these new powers.
Employers would need to show that whatever they asked the employee to do, this was neither making money for them nor providing services to them (or any linked companies), and it is difficult to see how the majority of tasks would not fall within one of those categories.
More difficult for HMRC to determine will be the ‘incompetent’ employers who have negligently, or indeed innocently, submitted inaccurate claims. It is understandable that because many employers rushed to get their claims submitted, they perhaps did not read all the fine print before doing so.
Now is the time for employers to revisit the claims they have made, using all of the updated guidance available, and check they have claimed correctly for each individual. The government website has invaluable guidance on the mechanics of the scheme, and the ACAS website also has useful FAQs. It is surprising the number of businesses who have not accessed these materials prior to making their claims. We have seen several cases where employees have challenged the way their employer has calculated their pay, and some of these have been resolved quickly simply by pointing the employers to the wording of the government guidance.
The draft legislation states that penalties will only apply if the employer fails to notify HMRC about the situation within 30 days (or 30 days of the Finance Bill receiving Royal Assent if before that date), so time really is of the essence for employers who feel they may have made claims open to challenge.
The draft legislation gives HMRC powers to make company officers personally liable, which will be used where there is a chance the company itself will be unable to pay, and this is likely to be key in persuading some individuals they should be making upfront disclosures as opposed to taking a risk on their fraud being discovered. However, where a business’s survival could be dependent on the fraudulently obtained grant, it remains to be seen how many of these will do the right thing.
Angie Crush, partner in the employment department of the specialist law firm Thomas Mansfield