Clearer guidelines released on furlough fraud penalties
Due to the extension of the Job Retention Scheme (JRS), the Government has released further guidance on furlough fraud and the penalties that may be payable if employers do not notify HMRC of any overpayments of the furlough grants made to them.
Employers should be aware that furlough fraud can occur in the following ways: by receiving any amount that the employer was not entitled to; or any amount the employer is no longer entitled to receive after a change in circumstances – eg an employee who is no longer employed by the company is still having their wages claimed for under the JRS.
Employers will not be charged a penalty for receiving such an amount if they notify HMRC within 90 days of having received the overclaimed, or overpaid, amount that they were not entitled to; or after they stopped being entitled to retain the amount they were paid because of a change in circumstances.
It can be easy for furlough fraud to go unnoticed and not all acts of such fraud are done deliberately. Therefore, the penalty set-up released by the Government takes into consideration any deliberate and non-deliberate behaviours of furlough fraud, as well as whether the employer was prompted to notify HMRC or not.
For non-deliberate behaviours that were unprompted:
- If HMRC is notified within 12 months of tax being due = 0% to 30% of the ‘potential lost revenue’ (PLR – the amount that is unpaid as a result failing to notify)
- if HMRC is notified 12 months or more after tax was due = 10% to 30% of the PLR
For non-deliberate behaviours that were prompted:
- if HMRC is notified within 12 months of tax being due = 10% to 30% of the PLR
- if HMRC is notified 12 months or more after tax was due = 20% to 30% of the PLR
For deliberate behaviours:
- where the notification was unprompted = 20% to 70% of the PLR
- where the notification was prompted = 35% to 70% of the PLR
For deliberate and concealed behaviours:
- where the notification was unprompted = 30% to 100%
- where the notification was prompted = 50% to 100%
The Government has emphasised that any overclaimed grant payments must be repaid, and employers can do this by repaying any monies owed to HMRC in their next furlough claim, or by contacting HMRC directly if they will not be making further claims.
If employers repay any overclaimed payments in their next claim, they should notify HMRC of the amount that has been overclaimed as an additional step to making a new furlough claim. Any new grant payments made to them will reflect the deductions made due to previous overclaimed payments. Employers should then keep a record of this for six years.