Be meticulous with furlough scheme paperwork, limited company bosses warned

Limited company contractors must be “meticulous” with their furlough paperwork, following a snap HMRC consultation on CJRS clawback measures due to bite from next month.

Issuing this alert, law firm Chartergates said PSC directors should take the forensic approach to both the amounts claimed via the scheme, and the “retention of supporting records.”

“In the event of a HMRC review [of Coronavirus Job Retention Scheme claims and records], which, in our view, is very likely at some point, such evidence will prove invaluable.”

'Significant yet unusually short'

The firm was advising after what it called a ‘significant, yet unusually short’ consultation on HMRC powers to recover inappropriate CJRS payments closed on Friday.

But the short running-time (just 11 working days) appears to be designed to ensure the measures can make it into the Finance Bill, with a view to enforcement from July.

As well as a clause to let HMRC penalise deliberate non-compliance with the CJRS, the measures include a 30-day ‘notification period’ for PSCs to self-report their mistakes.

'Can of worms'

“Firms have a chance to come clean…and pay the furlough cash or loan back without penalty,” reflected Andy Hallet of Recspand. “[But get] caught, you pay double.”

He deemed an activity which HMRC will use the measures to bear down upon – directors who took CJRS cash but who traded profitably during the pandemic, a “can of worms.”

“Furlough allowed many firms to trade profitably and was the reason why the government introduced it [in the first place], the former SThree director said.

'CJRS rules have moved over 20 times'

Also sounding concerned at the HMRC powers, but not just for contractor limited companies, but for recruitment agencies too, is Neil Carberry, chief executive of the REC.

“Today I raised issues with CJRS detail [on the taxation of payments] with ministers,” he said on Friday.

“If firms have done the right thing, and got the money to workers they shouldn't face hostile clawback from HMRC based on technicalities when the rules have moved over 20 times in-running. We need to protect agencies who acted to protect temps.”

'Easy targets'

An accountant specialising in fraud prevention, Juan Carlos Venegas posted: “My concern is if too much pressure is put on easy targets who didn't [actually] do anything wrong,

“[They] just [might] not be able to satisfy HMRC because the paperwork they have may not be enough…or satisfactory in HMRC's eyes.

“[So] these powers [could unfortunately just be a way to collect everything that has been given away [on the Coronavirus Job Retention Scheme]”.

'Low-hanging fruit'

Similarly referring to one-person companies, HMRC dispute firm Tax Resolute, which pre-empted the 30-day notification period, warned: “If HMRC goes after the low-hanging fruit, [we are] not sure how the economy will recover.”

News reports on the new clawback powers for HMRC have ranged from claiming the taxman will use them to purposefully ‘go after’ CJRS scheme users, to, at the same broadsheet reporting just a few days later, that he will ‘use them leniently.’

“The government is clearly worried, if not expectant, about the potential for innocent mistakes on the one hand, as well as contrived and fraudulent claims for such payments on the other,” said Chartergates, which specialises in employment law.

Addressing PSC directors, the firm added: “We would advise a meticulous approach in terms of the amounts claimed via schemes such as the CJRS as well as the retention of supporting records.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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