David Edwards, director and head of Harrison Drury’s regulatory team, looks at how HMRC intends to prevent abuse of the Job Support Scheme and what steps employers need to take to comply.
Earlier this year I looked at the risks for employers of flouting the rules of the Coronavirus Job Retention Scheme (“CJRS”) and warned of the risk of fraudulent claims.
It has now been reported that organised criminals have siphoned off up to £2 billion from the scheme.
HMRC has estimated that between 5-10% of the £39 billion in payments made under the CJRS are likely to have been claimed fraudulently.
Of these, it is “almost certain” that more than half have been paid to organised criminals posing as legitimate businesses, tax officials have told the National Audit Office (“NAO”).
What’s being done about fraudulent CJRS claims?
An internal survey by the NAO found that on top of the organised fraud, nearly one in 10 workers whose wages were covered by the scheme claim they were asked by their employer to work during furlough, which is against the rules.
The true scale of the money lost to fraudulent claims will not be known until the end 2021, HMRC estimates that it could reach £3.9 billion for the CJRS with further losses relating to a separate scheme for the self-employed.
The NAO report, published on 23 October 2020, states that government needs to do more while employment schemes are running, both to protect employees, and to mitigate the risk of fraudulent claims on the scheme.
HMRC expects to follow up on some 27,000 “high risk” claims, identified by comparing employers’ claims against the data HMRC already holds on them and against typical behaviour patterns.
Those who do not come forward to report errors can be fined up to 100% of the amount overclaimed and will be named and shamed.
What checks will HMRC carry out for the new Job Support Scheme?
The government has introduced new requirements to mitigate unjustifiable, incorrect and/or fraudulent claims. HMRC already has a huge task on its hands to recover money, which was fraudulently claimed, but such risks should hopefully be mitigated under the new JSS.
Under the JSS, HMRC has confirmed that it will check both claims and payments, which may then be withheld or required to be paid back, if a claim is found to be fraudulent or simply based on incorrect information.
What steps should employers take to comply with the rules?
Grants can only be used as reimbursement for wage costs actually incurred. HMRC commented that “our intention is that employees will be informed by HMRC directly of full details of the claim”.
Under the terms of the new scheme, employers must agree the new short time working arrangements with their staff by making any changes to the employment contract by agreement and also notify the employee in writing, the agreement must be made available to HMRC on request.
HMRC also intend to publish the names of employers who have used the scheme, and the public can report any suspicions of fraud to them.
Employees will also be able to check if their employer has made a claim relating to them via their Personal Tax Accounts. These new measures should help reduce instances of incorrect and/or fraudulent claims under the new scheme.
It is of paramount importance for all businesses to comply with the requirements of HMRC under the scheme, including the need for written agreement over any short time working arrangements.