The amnesty period for employers to self-report any cases of ‘furlough fraud’ to the government is to be extended to three months, according to proposed amendments to the finance bill.
Under a draft bill going through parliament, employers that 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 to the government – up from 30 days in a previous draft of the bill.
The new draft 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.
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As well as the furlough scheme and the self-employment income support scheme (SEISS), which were both covered by the previous draft of the legislation, these powers would also cover grants made under the coronavirus statutory sick pay rebate scheme, the coronavirus business support grant scheme, and other Covid-19 grant schemes.
Under the rules, any organisation caught deliberately using grant money for anything other than its intended purpose could face a financial penalty.
The legislation could be passed as early as July as part of the Finance Bill 2020 currently progressing through parliament. The 90-day period to report any mistakes on claiming coronavirus support grants is expected to start after the bill is passed.
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Dawn Register, partner in tax dispute resolution at BDO, said the extension is a welcome change that gives businesses a more realistic time period to check their claims and notify HMRC of any corrections.
“Given the huge volume of government guidance and changes in July already, we consider the extension to a three-month period crucial to allow businesses time to review claims and seek professional advice where necessary,” Register said.
She said there will be many cases where “innocent mistakes” are made given the “difficult trading conditions for businesses” during the lockdown, and many organisations will need to do a catch-up exercise on their payroll paperwork.
“Businesses should start to check – and double check – now that their government support claims are correct,” she advised.
Alan Price, CEO of BrightHR, said employers need to remember that furlough scheme, SSP rebate scheme and other coronavirus grants continue to cost the government a substantial amount of money – sums they will look to recoup if any discrepancies in their use are found.
In its latest report on the costs of the government’s coronavirus policies, published earlier this month, the Office for Budget Responsibility estimated the cost of the furlough scheme to be £60bn.
Price advised employers to prepare for audits and clearly demonstrate when, and how, government funds have supported their business in ways that are compliant with the law.
“Without detailed paper trails, it may be challenging for employers to justify their use of these schemes: something that could result in them paying out significant amounts, including the potential for a 100 per cent tax on furlough payments,” Price said.
“News of furlough fraud is likely to be very prevalent in the next few months; companies who are identified as having fraudulently claimed money under coronavirus schemes, whether mistakenly or not, could also face some very negative press.”
Potential abuses of the coronavirus grant schemes – including employers fraudulently putting employees on the furlough scheme but asking them to continue working – have come under intense scrutiny in the past couple weeks.
A recent poll of 2,000 furloughed employees across the UK found a third (34 per cent) had been asked by their employer to carry out their normal duties, despite their employers claiming back their wages under the government’s coronavirus job retention scheme.
Of those, 18 per cent said they had been asked to work for another company linked to their employer, and a similar number (19 per cent) were asked to cover someone else’s job within their organisation.
Beverley Sunderland, managing director at Crossland Employment Solicitors, which undertook the research, said it is very important for any business that believes it has made a mistake to repay any monies claimed, especially as the finalised penalties for such abuses of the system have yet to be determined.
“The government has yet to publish its final plans in relation to the penalties for falsely claiming a grant under the furlough scheme, but as it currently stands a fraud on the Treasury can carry life in prison,” Sunderland said.
“While the penalties are unlikely to be as draconian, the reputational damage done to a company found to have falsely claimed while asking an employee to work should be deterrent enough.”