Employers will be given a further three months to own up to furlough fraud after the government announced it will extended the amnesty period to three months.
Proposed amendments to the Finance Bill currently going through parliament mean that employers who have either knowingly misused the furlough scheme, or think they may have accidentally done so, will be given a 90-day window to admit their mistake – up from 30 days in an earlier draft.
The legislation will also extend HMRC’s powers to check that any coronavirus-related grants made to employees have been used correctly – in the case of the furlough scheme, to pay workers’ wages – and to ensure employers have not been overpaid in any form of reimbursement.
Some businesses are reportedly asking furloughed staff to work, despite this being in direct contravention to the job retention scheme’s rules.
If a company received ‘furlough monies’ which it was not entitled to then it will be subject to 100 per cent income tax on those monies
A poll of 2,000 furloughed employees found that 34 per cent had been asked by their employer to commit furlough fraud by carrying out their normal duties. A further 18 per cent said they had been asked to work for another company linked to their employer, and a similar number were asked to cover someone else’s job, according to the research by Crossland Employment.
Under government legislation, staff who have been furloughed through the scheme cannot be asked by their employer to continue to work either for them or a company linked to them.
Dawn Register, Tax Partner at BDO told us the amnesty extension was a welcome change that gives businesses a more realistic time period to check their claims and notify HMRC of any corrections”.
She said: “Given the huge volume of government guidance and changes in July already, we consider the extension to a three-month period is crucial to allow businesses time to review claims and seek professional advice where necessary.
there will be many cases where innocent mistakes are made, given the difficult trading conditions for businesses during Lockdown
“The legislation will now also cover the new Coronavirus Statutory Sick Pay scheme, in addition to the furlough (CJRS) scheme, the SEISS and other Covid-19 grant schemes.
“If a company received ‘furlough monies’ which it was not entitled to then it will be subject to 100 per cent income tax on those monies. The legislation now confirms that this tax is not payable under Quarterly Instalment Payments (QIPS), which is also a helpful clarification for larger companies.”
She added: “We expect there will be many cases where innocent mistakes are made, given the difficult trading conditions for businesses during Lockdown. Also, a ‘catch up’ exercise may be needed on paperwork. Businesses should start to check and double check now that their Government support claims are correct.
“We know HMRC is receiving whistle-blower reports where abuse of Covid-19 support is suspected. We expect HMRC enquiries and serious investigations will follow the 90-day correction window.”
The 90-day period will start after Royal Assent of the Finance Bill, expected before the end of July, giving firms until the end of October to own up.
The latest Government figures show that up to June 21, 1.1m employers have received £22.9bn under the furlough Scheme. A further £7.6bn has been paid to 2.6m self-employed businesses under the Self-Employment Income Support Scheme.