Comprehensive legislation has been included in the Finance Act in respect of HMRC furlough enforcement.
What does HMRC furlough enforcement mean for your business?
Any Coronavirus Job Retention Scheme (CJRS) grants that have been over-claimed (and that includes amounts that you’re no longer entitled to, for example because an employee has left but you continue to apply for a grant for them) can be corrected as part of the next claim.
If you’ve no further claims to make you can make a repayment direct to HMRC. You need to call first, and it will give you a payment reference number beginning with an “X” which will distinguish the repayment from any other HMRC remittances. If you’ve under-claimed you need to ring HMRC on 0800 024 1222 and discuss the case.
HMRC and Furlough Enforcement – Penalty Rules
Penalty rules are included in Finance Act 2020 which received Royal Assent on 22 July 2020. You have 90 days to notify HMRC of an over-claim that you have not yet repaid to avoid a penalty. So, for grants received on or before 22 July 2020 you must notify HMRC by 20 October 2020.
For money received after that date it’s 90 days from the date of receipt. If the over-claim has happened because your circumstances have changed, you have 90 days from the day that occurred to notify. If you fail to notify HMRC it can charge a “behaviour based” penalty, which can be up to 100% of the overpaid grant.
The overpayment is classed as tax that is due to be repaid, so when you receive an assessment of this from HMRC you will have 30 days to pay, if not there will be late payment penalties and interest from day 31.
There are confusing rules about record keeping. For employment law purposes you must keep records of furlough arrangements with employees for five years, but for HMRC compliance purposes you’re required to keep records for six years of the amount claimed, the claim period for each employee, the calculations and any correction made, and for July onwards, the usual hours and actual hours for each employee.
If you’ve had staff on furlough under the CJRS and are confused about the furlough enforcement rules, get in touch and we can advise.