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Are you an employer claiming money under the government’s Coronavirus Job Retention Scheme (CJRS)? If so, you should be alert to the risks of misusing the scheme.
The latest numbers show that 9.3 million UK workers have been put on furlough since 20th April 2020. However, there are growing concerns that many employers may have submitted claims in breach of the CJRS rules.
A key aspect of being put on furlough is that workers must not perform services for their employer during their furlough leave. However, over the last month, reports have emerged of many large companies and SMEs accessing funds under the scheme, whilst also requiring staff to continue working in some capacity as a way of deliberately exploiting the CJRS. This led Jim Harra, Chief Executive of HMRC, to comment that the scheme was “a magnet for fraudsters” and that reports of misuse would be taken “very seriously” by HMRC. Other concerns have included employers fraudulently inventing new employees, not passing furlough payments on to employees and backdating claims.
Employers making fraudulent claims are at serious risk of criminal prosecution, in addition to HMRC fines and penalties. Company directors are also at risk of personal liability. Of course, most employers are not deliberately making false claims under the CJRS but it is also clear that carelessness in relation to qualification for payments, or the amounts claimed, can also give rise to significant fines and penalties. HMRC’s enhanced powers to impose fines and penalties will be introduced pursuant to the Finance Bill 2020. The Bill, which is still in draft and working its way through Parliament, is expected to receive royal assent this month.
Employers should take the opportunity now to review previous claims and conscientiously abide by any further guidance or clarification provided. Importantly, employers should promptly report to HMRC any errors made, as this is likely to limit future HMRC intervention and penalties.
Employers need also to be aware that if an employee reports their employer’s possible misuse of the CJRS and this leads to the employee being dismissed or suffering any detriment, the employee could bring a whistleblowing claim which, on top of any financial award, could inflict serious reputational damage on the business.
In our last article, which can be read here, we described in detail how the CJRS has changed. Further guidance from the Treasury has introduced new wording on the purpose of the CJRS, which states that funds must be used to "continue the employment of employees in respect of whom the CJRS claim is made". This applies to all claims, past and present, that have been made under the CJRS.
Previous guidance made no mention of a requirement for ‘continued employment’ and simply stated that provided the employer had been impacted by the Covid-19 pandemic, it would be allowed to use the CJRS. The new wording has caused some debate as to whether it may be a breach of the rules to use the CJRS in relation to payments made to employees that are under redundancy consultation or notice of termination where the employer has plans to dismiss.
Despite the amended purpose of the scheme, the Employees' CJRS Guidance expressly states that "your employer can still make you redundant while you're on furlough or afterwards". Furthermore, Acas guidance mentions that employers can still claim for notice pay under the CJRS. The HMRC’s helpline has also reportedly reassured callers that employers may continue accessing the scheme during redundancy consultation and notice periods. In addition, the Treasury has this week confirmed that employers “may continue to claim under the scheme for a furloughed employee who is serving a statutory notice period”.
Although we do not have any formal or binding clarification from HMRC on this point at the time of writing, on balance, we are of the view that employers can use the CJRS to pay salary during any period of consultation or notice (but not to claim payments in lieu of notice or other redundancy payments). However, employers should still look out for any further guidance or clarifications that are issued by HMRC on this issue.
Be sure to follow our social media channels as we continue to keep you updated on the latest coronavirus developments. If in doubt, please take advice. You can reach us on 0161 941 4000 or via email at email@example.com