Will I Need To Repay Furlough Claim? In response to the devastating impact of the coronavirus on the UK’s economy, the government introduced a scheme known as the Coronavirus Job Retention Scheme. The Furlough scheme arose by virtue of Sections 71 and 76 of the Coronavirus Act 2020.
The structure of the scheme was to enable companies to retain their employees as opposed to making them redundant.
It enables companies to receive from the government 80% of an employees wages subject to a maximum cap of £2,500 per month.
In essence one of the central requirements of this scheme was that the employee must not work full stop the skiing was designed to save the employee used job that otherwise would have been lost as a consequence of covid-19.
The Coronavirus Job Retention Scheme has been extended now until the 30th of April 2021.
Furlough Fraud: Will I Need To Repay Furlough Claim?
It is perhaps unsurprising that in such circumstances with so many businesses and people involved in the scheme that some fraud, unfortunately, is likely to have arisen.
As a result, the government passed legislation in the Finance Act 2020 to address the risk of this fraud. This is set out in Schedule 16 of the Finance Act 2020.
How Does The Furlough Scheme Operate?
In order to be eligible to claim on the scheme, employers must have confirmed to their employees in writing that they have been put on Furlough.
In order for this to happen steps must have taken to ensure that the agreement is consistent with employment, equality and discrimination laws Employers must keep a written record of the agreement for five years, keep records of how many hours the employees work and the number of hours they are Furloughed for.
The employee does not have to provide a response in writing and there is no requirement for the employer to place all employees onto the Furlough scheme.
However, employees that are on the Furlough scheme would not have been permitted to undertake any work whilst they were Furloughed on a full-time basis. Employees that were on the more flexible Furlough scheme could work for any amount of time and any working pattern but for the amount of time that the records show them down as being on Furlough for.
An employee that is on the flexible Furlough element of the scheme would need to agree to this position and the company should keep a written agreement confirming this arrangement was in place.
There was no minimum Furlough period and the flexible Furlough agreement could last for any amount of time. Indeed employees could enter into a flexible.
The key point is that the hours during which the employee is recorded as being on Furlough cannot result in them doing any work for the organisation or providing any services. However, the employee can take part in training, volunteer to work for another employer organisation provided that was within the pre-existing terms of their employment contract.
What If A Company Has Incorrectly Claimed From The Furlough Scheme? Will I Inevitably Need To Repay Furlough Claim?
The short answer here is, yes, repayment of Furlough claim is inevitable.
What Sort Of Breaches Of The Coronavirus Scheme Could Have Emerged?
If employers have claimed on the Furlough when an employee was working that would be a breach of the Coronavirus Job Retention Scheme. Further, if an employee does not know that they have been put on furlough and the company has claimed a Furlough payment, again that would be a breach of the scheme. In the same way, claims in respect of employees that do not or have not been put on the company’s payroll also would be a breach of the scheme. Finally, a concern will have arisen that employees may have worked longer hours than recorded on the company’s payroll (and other records of the company). Therefore there is a risk that such a company could have claimed a disproportionate amount of compensation from the Furlough scheme.
Concerns about over-claiming or inappropriate claiming from the Coronavirus Job Retention Scheme appears to have led to HMRC receiving significant numbers of calls from members of the public who have been whistleblowing.
Consequences Of Abuse Of The Furlough Scheme. Will I Need To Repay The Furlough Claim?
In the event that the Furlough scheme has been abused or if there has been a mistake, then there was a ninety-day window in order to notify HMRC as to this position and to come clean.
However, where an abuse of the scheme has taken place but there has been no admission as to this effect and HMRC becomes aware of the position, it is expected HMRC will commence an investigation into such matters. The prospect arising could be that of both Civil and Criminal proceedings being brought.
In view of the ninety day window of opportunity, companies should have reviewed their Furlough claims and if necessary made the appropriate notification to HMRC accordingly.
In the interest of good faith, it makes sense even now that the period of forgiveness has elapsed, that if there has been a genuine mistake, that to avoid the prospect of penalties arising on an escalating scale, the taxpayer should now come clean to HMRC in a clear and accurate manner.
What Happens To Companies That Do Not Make A Notification To HMRC?
If an organisation has received a Furlough payment that it should not have received but did not make a notification to HMRC then paragraph 15 of Schedule 16 of the Finance Act 2020 relevantly provides an individual responsible for the management of the company, to be jointly and severally liable to HMRC in relation to the Furlough payment.
If you are a Director of a company that has received a Furlough payment then you should review carefully whether or not there has been knowledge of non-entitlement to a payment from the Furlough scheme and act accordingly. If it can be determined that the application for repayment of the fellow scheme was undertaken wrongfully and deliberately then an escalating series of penalties can arise, along with interest.
As with any instance of potentially suspected fraud and dishonesty it is essential that the matter is taken very seriously.
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If you have any concerns in relation to a Furlough payment that your company has received and any failure to make the appropriate notification to HMRC then Contact Us as soon as possible for advice. Our expertise is at your fingertips.
Disclaimer: this post ‘Will I Need To Repay Furlough Claim?‘ is not legal advice and not to be treated as such. No liability is accepted for any reliance placed upon this post ‘Will I Need To Repay Furlough Claim?’. You should take independent professional advice on the specific facts of your case as to the point of this post ‘Will I Need To Repay Furlough Claim?‘.