Contractors’ Questions: What to beware as the furlough scheme amendments deadline looms?

Contractor’s Question: Does the case of a supposed entrepreneur whose businesses apparently included IT services but who fraudulently claimed furlough grants of £20million hold any lessons for limited company IT contractors?

As a limited company /PSC director, I also used the Coronavirus Job Retention Scheme, and I note that amendments to September claims can still be made up until October 28th. Please advise.

Expert’s Answer: Given the complexities, not least calculation of the grants under the CJRS, it is quite understandable that there will have been unintentional, entirely innocent errors made by PSCs, eligible to claim a grant, resulting in both underpaid sums and overpaid sums.

HMRC has acknowledged these inadvertently incorrect payments and on the face of it, adopted an understanding approach. In particular, the Revenue has suggested their focus will instead be on those they consider having made questionable and fraudulent claims.

Two inevitable risks

Inevitably, due to the fast turnaround to get the scheme on its feet, the CJRS was always at risk of fraud and error.

The behaviours likely to be of interest to HMRC can be summarised as follows:

• Fraud

This occurs where the claimant (or the ‘employer’ for CJRS purposes) deliberately sets out to misrepresent their circumstances to get money to which they are not entitled to; and;

• Error

This occurs where the claimant inadvertently receives the wrong amount due to incorrect information being provided, but with no deliberate intent to mislead, or incorrectly calculate the award.

Your final opportunity to amend

No doubt there will be a slow upturn in the number of furlough scheme investigations being launched by HMRC, given that any final amendments to claims can indeed made by Thursday October 28th 2021. 

Until that point, it is unlikely HMRC would be able to measure the true extent of fraud and error, not only in respect of the CJRS but all the covid-19 income support schemes that were made available. Indeed, it could be some time before a clear picture emerges.

Thousands of furlough scheme interventions, tens of thousads of nudges

Following a recent Freedom of Information Act request to HMRC, we understand that, as of June 30th 2021, HMRC had opened 7,511 interventions -- all of which HMRC believes indicate non-compliance with the CJRS.

In addition, as of July 31st 2021, a further 36,000 claimants have been contacted to encourage them to correct claims and repay monies where their claim does not align with the information that HMRC hold. 

Lastly, a recommendation

While this is a very low proportion of the total number of organisations that have made a claim under the furlough scheme, we would strongly recommend that companies who have claimed a grant, should carry out a thorough review of all records, documents and claims in readiness for such inspections. 

The expert was Naseerah Mussa, a consultant at employment law specialists Chartergates.