The Coronavirus Job Retention Scheme (CJRS) was introduced with the aim of safeguarding UK jobs during Covid-19 and has almost certainly gone a long way to do so. Under the CJRS, businesses have been able to furlough staff rather than make them redundant, with the furloughed staff receiving up to 80% of their wages from the Government in the form of a grant paid to the employer, with an upper limit of £2,500 per month. The CJRS is due to end on 31 March 2021.
A number of factors have left the CJRS open to abuse, including the speed with which it was introduced and the intricacies of the CJRS rules. HMRC has acknowledged the inevitability that some employers may have inadvertently breached the rules.
Might this impact you as an employer?
The Finance Act 2020 gives HMRC substantial enforcement powers in relation to the CJRS. In particular, Section 106 and Schedule 16 to the Act, entitles HMRC to claw back CJRS payments made to businesses which were not entitled to receive them, or where it can be shown that the payments were not used to pay employment costs.
What if the business is insolvent?
Where a business has become insolvent or insolvency is considered likely, HMRC can make Directors jointly and severally with each other and the company for the company’s liability where there has been a deliberate decision to claim or retain CJRS grants, to which the company was not entitled.
What are the sanctions?
A financial penalty can be given if the company fails to tell HMRC it was not entitled to the CJRS grant and the Directors knew this. The penalty may be as high as 100% of the lost revenue if it can be shown there was a deliberate concealment.
If enforcement action is taken, the penalty will not be less than 30% if the money is repaid at an early stage; criminal charges are also an option for HMRC.
If employers notify HMRC that they have received a payment to which they are not entitled before enforcement action is taken, that may result in no sanctions being imposed but there are strict time limits within which the notification must be made.
If the company can’t or won’t pay, HMRC won’t be shy in taking action against the Directors personally.
What should you do?
If you have received a CJRS grant, we would encourage you to carry out a full review of your records to ensure that you have not fallen foul of the rules and potentially become liable to enforcement action.
It goes without saying that the Government will be keen to recover any payments it can show the company was not entitled to, and I suspect that, when the CJRS ends in March 2021, proactive steps will be taken to do so, with dedicated resources being made available given how much is potentially up for recovery.
If you would like to discuss anything within this article, please contact Marcella Cox on 020 8515 1968 or by email on [email protected]