HMRC CJRS compliance review | Update

The Coronavirus Job Retention Scheme (CJRS), in place from March 2020 to September 2021, allowed employers to reclaim certain employee costs in the form of a Government grant administered by HMRC when their employees were furloughed. Around £69bn was paid out to 1.3m employers. HMRC estimated that 5-10% of the amounts paid were overclaimed due to fraud or error and set up a Taxpayer Protection Taskforce (TPT) to pursue error and fraud in the Coronavirus schemes.

In September 2023 the TPT was integrated back into the HMRC compliance teams, but it would be a mistake to think we have heard the last of CJRS.

The Chancellor, Rachel Reeves, is reportedly looking to recover billions in Government funds lost to Covid-related fraud. With HMRC anticipated to receive additional funding per Labour’s manifesto commitments, HMRC could be set to review claims for the Coronavirus Job Retention Scheme (CJRS) with a renewed focus.

Whilst its now back to business as usual for the TPT, CJRS enquiries will continue for as long as HMRC feels they are cost effective. Organisations should therefore make sure they kept all the records used in the calculations (including for example furlough agreements, any proof employees did not work, employee communications) for the required six years ideally along with notes made of the key decisions taken at the time in case they get selected.

Case Study

HMRC requires proof of all workings made on the initial 80% reference period used in addition to the calculations used for each pay period (weekly/monthly). These calculations can be very time-consuming for business owners.

One of our clients was challenged on their CJRS claim and received a charge for an over-claim. We responded to the allegations on their behalf by providing HMRC with further reasons and clear evidence for the method of calculations.

We evidenced our reasoning using extracts of guidance we used to draw our calculations, which we obtained from GOV.UK and other documents from March/April 2020.

Upon providing this clear evidence and arguing the case on behalf of our client, HMRC agreed that we were correct and wrote off all over claim charges for our client.

How can I prepare for a compliance check?

It will be interesting to see the depth in which HMRC will investigate the CJRS claims in the future. It highlights the importance of ensuring you have the right legislation documented – to best prevent needing to make repayments to HMRC.

Other ways to prepare for a compliance check include;

Ensuring all furlough workings are saved on file and are easily accessible should you be audited; this is for each pay periods calculation, but also for the reference salary used for the 80%.
Be prepared to find the legislation used to back up your workings.
Ensure all payslips and reports reflect the furlough payments and, again, are available to reconcile against.
A record of the claims submitted to HMRC, along with payments received from HMRC.

You can read more information below to find out what you should do if you receive a compliance check letter from HMRC regarding an over-payment of a CJRS grant.

If you require further support regarding HMRC compliance checks, repayment of a CJRS grant, or any support regarding employment or payroll, please contact Zoe Masterson, a Payroll Manager at Price Bailey, using the form below.

What should you do if you've received a compliance check letter from HMRC regarding CJRS grants?

There can be a lot of information to digest if you receive one of these letters, but firstly you should make a note of all the deadlines requested of you. Some of these deadlines could be relatively imminent, so you may potentially need to contact HMRC and try and agree a time extension. The initial letter will probably require you to collate a significant volume of supporting information, ranging from the furlough letters with your employees, to supporting calculations and pay information relating to those employees. It is important to provide all the information that HMRC is requesting in full, and in a clear format. You should also be prepared to send in additional information as the enquiry progresses.

Also consider that HMRC may challenge you on how you interpreted the CJRS guidance at the time you made the claims. It is important to clearly articulate the reason why you calculated the way you did; this could differ to how HMRC meant the guidance to be read.

Due to the volume of information requested and, how HMRC could challenge you on how you have interpreted the guidance, albeit in the good faith at the time, you should strongly consider taking professional advice to reduce the burden on management teams and to benefit from their experience.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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