Furlough fraud – Will HMRC charge a penalty for over-claimed furlough?
27 August 2020
What is Furlough Fraud?
The government has defined that any of the following actions could lead to furlough fraud:
• Any amounts the employer is not entitled to receive.
• Any amounts the employer is no longer entitled to receive after a change in circumstances- Example: An employee who is no longer employed still having their wages claimed for under CJRS.
Will HMRC charge a penalty for over-claimed furlough?
HMRC’s primary concern is to address non-compliance with the scheme. It is inevitable that errors and mistakes will be made, however you will not be charged a penalty provided you did not know about the error at the time it was received or at the time that their circumstances changed and it is repaid within the following time period:
• 12 months from when their accounting period ends to rectify errors
• until 31 January 2022 for sole traders/partners
Whilst errors can be rectified, you will still need to report this as the following penalties may otherwise apply:
• income tax charge – full over-claimed amounts may be recovered if HMRC make a tax assessment for the amount over-claimed, of which payment of the assessed amount will be due 30 days after the assessment (otherwise interest will be charged on the tax from day 31)
• company officers can be made personally liable in the cases of insolvency
• 100% penalty for failing to notify HMRC, within the below notification period
• details of employers that deliberately over-claim may be published
• partners will be jointly and severally liable for any over-claimed grants repayable
How can you avoid penalties for over-claimed Furlough?
If you repay the over-claimed grant, this will prevent any potential tax liabilities. Notification of any over-claimed furlough grant payments need to be made within any of the following notification periods:
• 90 days after receiving the over-claimed payment
• 90 days after the day circumstances changed
• by 20 October 2020
To make correction to your furlough claim you can either correct the error on your next claim or contact HMRC CJRS helpline and arrange to repay the over-claimed furlough directly to HMRC. You will be given a specific reference number to make the payment.
The Government has emphasised that any over-claimed grant payments must be repaid and, as already mentioned, your client can repay it to HMRC in their next furlough claim. They should notify HMRC of the amount that has been over-claimed as an additional step to making a new furlough claim and any new grant payments made to them will reflect any deductions made due to previous over-claimed payments. Your client should keep records of this for six years.
