Contractors’ Questions: How to handle HMRC’s furlough scheme letter asking me to review my CJRS claims?
Contractor’s Question: Is there any further guidance available for limited company contractors in receipt of HMRC’s letters about the CJRS, asking the recipient to review their usage of the scheme? Does a letter imply I’ve done something wrong in relation to my use of the scheme?
Expert’s Answer: It should be noted that limited company contractors are not the only target of such a letter.
We have been made aware the letter urges those who have been contacted to get in touch with HMRC - whether or not there has been a miscalculation. Therefore, the sensible approach would be to ensure that CJRS claims are reviewed in line with the guidance published and contact made with HMRC.
The letter is clearly not a notice under Schedule 36 Finance Act 2008 to produce information so there doesn’t appear to be a statutory obligation to respond.
However, in our view it is prudent to carry out a self-review of the claims submitted to date to ensure they are complete and accurate. Where an error is found by the taxpayer during the self-review, it should be rectified immediately.
As most ContractorUK readers will be aware, HMRC guidance on the CJRS has been updated numerous times. In an effort to help taxpayers, HMRC has now setup a link to previous versions of the CJRS pages on the National Archives website.
Regarding your second question, we understand that a significant number of letters have been sent as the first stage of HMRC’s compliance approach. The letters have been sent in cases where the business may have claimed more than they are entitled to under the CJRS and/or that they may not meet the conditions to receive the CJRS grant.
The basis for selection has not been revealed by HMRC to date, but we can assume the RTI system will have provided some information. This could include such things as the number of employees engaged by the employer on the payroll at the qualifying date, compared with the number of furloughed employees on the CJRS claim.
In addition, there have been widespread reports of individuals contacting HMRC’s Fraud Line about their employer’s approach to the CJRS. In our view, such information would have been utilised to identify businesses.
Be aware that legislation has been introduced in the Finance Act 2020 which gives HMRC the power to recover CJRS overpayments, particularly targeting incorrect claims arising from deliberate non-compliance or fraudulent behaviour. We understand HMRC will not look to penalise ‘innocent’ errors – whatever those may be!
Where you uncover an error...
If a company does detect a CJRS overpayment, under the Finance Act, the taxpayer must notify HMRC of the overpayment by 20 October 2020 or 90 days of receipt of the grant or the change of circumstances meaning entitlement ceased, whichever is later. In such cases, we would suggest the taxpayer should contact their professional advisors before approaching HMRC directly.
The expert was Naseerah Mussa of Chartergates, specialists in tax, VAT and employment law.