Coronavirus Job Retention Scheme Penalty Regime

The Government has announced its proposed penalty regime in relation to fraudulent claims under the Coronavirus Job Retention Scheme (“CJRS”).  The regime is expected to be given Royal Assent by the end of July.

A furloughed employee under the scheme is an employee who “has been instructed by the employer to cease all work in relation to their employment” and abuse of this is likely to be at the centre of any potential enquiry from HMRC.

There are already press reports that certain surveys suggest up to one third of employees have been asked to work while on furlough, and suggestions that HMRC have received over 1,900 claims to their online fraud reporting service from employees.

A further angle of attack will be in respect of Directors.  Directors must continue to meet their statutory duties to file returns with HMRC and Companies House and the rules specifically allows Directors to provide information relating to the administration of their company while on furlough. However, a director must not create income for their own business or company.  

Under the proposed penalty regime HMRC will have the power to apply penalties where an employer has deliberately made an incorrect claim or has failed to pay the grant claimed to its employees.  The grant will need to be repaid along with a penalty of between 30% and 100% of the clawed back grant where a voluntary disclosure is made and between 50% and 100% where HMRC prompt the disclosure.

The penalties will only be applied if the employer fails to tell HMRC of the error by the later of 30 days of making any claim and 30 days of the law being passed. 

We are here to help so contact us if you have any queries in relation to your furlough claims, processes or documentation.