By the Aspire Business Partnership
As expected the Revenue are making plans to spot check and audit UK businesses that make use of Coronavirus Job Retention Scheme. Below you find some helpful information and key details that you should be taking into consideration when making use of the scheme, written by the Aspire Business Partnership.
For many UK businesses, the consequences of key decisions made during the COVID-19 pandemic may prove more damaging than the effects which are currently being felt.
The Chancellor of the Exchequer announced unprecedented measures to help business ride out the storm but, is the storm brewing for those businesses who have failed to properly consider all their financial options, demonstrating a scant regard for the “spirit” of the new measures.
The Coronavirus Job Retention Scheme (CJRS) has proved popular with many businesses as a way of reducing payroll costs caused by a restriction in trading conditions. However, there is no doubt that HM Revenue and Customs (HMRC) will, at some stage, seek to challenge the eligibility of employees for whom the grant has been claimed and seek to recover any overpayments together with penalties and interest from the employer.
As part of its post-COVID PAYE audit regime, HMRC is likely to request detailed information regarding the furlough process i.e. selection criteria, decision making and financial aspects (similar to redundancy selection criteria) which should all have been considered at the time the decision was made to claim the grant.
HMRC has already started the ball rolling with the introduction of limited checks to minimise fraud i.e:
• the requirement for an employer to have already been authenticated
• a four- to six-day payment processing period to allow background checks
• checks on employers after a pay-out has been made to verify a claim was real
• the introduction of a whistle-blower hot-line to report abuse of the scheme
Faced with a redundancy selection head-ache after 31st May 2020, employers may now be faced with the additional threat of being reported to HMRC by aggrieved employees.
As part of its audit regime, HMRC will be looking to ensure that employees have not continued to work for a “linked employer” whilst being furloughed and the correct reference pay has been used to calculate the grant.
Top 10 Areas for HMRC Investigation
1. Mobile telephone records – we have already seen such records being used to calculate working time.
2. Email records – is there evidence to demonstrate e-mail correspondence has taken place during the furlough period.
3. Employment Contracts – to establish whether any discretionary payments have been included.
4. All correspondence with furloughed employees and directors together with furlough agreements. This may extend to interviews with employees.
5. Client Lists – to access information regarding contact points via e-mail.
6. Payroll records as at 19 March 2020
7. CJRS claim records
8. Training records – whether this training has been paid in accordance with NMW Regulations.
9. Financial Solvency Information – bank accounts, cash forecasts and reconciliations to demonstrate the health of a business prior to the decision to furlough.
10. Sickness, Maternity and Paternity Records
HMRC – Risk based approach
There is little doubt that HMRC will seek to conduct risk-based audits to recover overpaid CJRS payments and that this role will be handed to the Fraud Investigation Service which will not hesitate to utilise its formal information powers in appropriate circumstances.
Whilst HMRC has suspended a lot of its routine tax enquiries, the approach taken by HMRC post COVID will be robust and underpinned by the need to recover some of the billions of pounds claimed by those businesses which, according to HMRC, have not acted in the “spirit” of the CJRS guidance.