Furlough claims – Ooops!
Many businesses have inadvertently made errors in their furlough claims and a small number have knowingly over claimed. HMRC say they are not writing anything off and have legal powers to recover this money up to 20 years after the event. Although saying they are not actively looking for innocent errors, enquiries may well highlight problems which will require repayment of some of the claims.
One of the first cases involving HMRC clawback of furlough payments was recently taken to the tax tribunal. The case involved furlough payments for two members of staff who started employment just as the pandemic hit. Though they began work in February 2020, it wasn’t until 25 March 2020 that they were included on an RTI return, six days past the deadline. The tribunal agreed with HMRC that claims for these employees were invalid and should be repaid. It cost the taxpayer more than £20,000 in repayments.
Another common misunderstanding was claiming for employees who were doing work while furloughed.
HMRC enquiries usually start with a phone call asking you questions about your circumstances during the pandemic. Depending on your business and whether you continued trading, they will want to know how that was possible if all your staff were furloughed.
To avoid complications, ensure that furloughed employees did not engage in any work activities during the claim period. If errors are discovered, it is advisable to disclose them to HMRC voluntarily. This proactive approach may result in more favorable terms for repayment and reduced penalties.
Businesses should also maintain thorough records of furlough claims and employee activities during the furlough period. Documentation, such as payroll records, communications with employees, and detailed timesheets, can be crucial during an HMRC enquiry.
In summary, vigilance and accurate record-keeping are key to managing furlough claims and avoiding costly repayments and penalties.