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Correspondence from a reader on HMRC letters checking employers’ coronavirus job retention scheme claims.
Coronavirus job retention scheme claims
I am contacting you in relation to an issue that we believe may be of relevance to a large number of readers. This issue is the approach being taken by HMRC to compliance activity in relation to clients who have submitted coronavirus job retention scheme claims (CJRS) claims for furloughed workers. We are not talking about the outright frauds that we have all read about in this area, but claims made in good faith by genuine businesses.
For the past 16 months, we have been calculating and submitting CJRS furlough claims for clients. The calculations (especially in the early days) were done under immense pressure, following rules which seemed to change or be clarified daily, with different calculations needed for different pay periods, with varying deadlines for submissions. Our small firm alone was doing 80 clients’ furlough claims each month, and some of those payrolls had 20-30 employees, with extremely complex calculations.
It seems that HMRC is now sending out fishing letters – an extract from which follows:
‘We make regular checks on money paid out under the coronavirus job retention scheme (CJRS). Our records show you may need to repay some or all of the grant you have received.
‘This is because, based on the information we hold about you and your employees, you may have claimed for a CJRS grant which is more than you are entitled to.
‘What you need to do now
‘Please review your records, including your CJRS claims and take the action below by xx July 2021.
‘If you believe your claim is correct
‘You must email us directly to confirm you believe your claim is correct. We may then contact you to ask for more evidence to support this.’
A client received such a letter two weeks ago and of course immediately panicked that we had calculated their CJRS claims incorrectly and that they would have to pay it all back even though their employees have already been paid the money. We are talking thousands of pounds.
The client of course was looking to us for answers, so we called HMRC to request more specific information. They said that they couldn’t give us any specific information and it was up to us to look through each and every furlough claim, for each and every employee, from March 2020 to June 2021(!), to see if we could find any errors.
We told them that this was like standing with a building regulations officer in front of a large new build house and them saying to us ‘we can’t pass the building regs because there might be a defect in the building, but we want you to go find it, and we can’t tell you what it might be or what room it is in – oh, and by the way there might not be a defect at all’.
We have submitted an official complaint to HMRC about this approach. HMRC should be helping taxpayers to get things right, not trying to catch them out, and not creating literally hours of work and a lot of stress for clients and accountants who have done their utmost to navigate the past 16 months’ worth of constantly changing rules and grants in good faith and under extremely stressful circumstances. I do not understand why HMRC cannot be more specific – even telling us which employee or which month they are concerned about would be a start.
We have had no option but to send HMRC an email stating that we believe the claims are correct, and therefore now await the perhaps inevitable formal enquiry. But this has left our client having sleepless nights, and left us embarrassed and unable to provide any comfort. It could be weeks or months (or never) when HMRC decide to open a formal enquiry, by which time our client might have paid yet more ineligible furlough pay to their employees.
Interestingly, it was only very recently that I read an article in Taxation about ‘nudge’ letters in relation to undeclared offshore income (‘A gentle nudge’ by Katherine Bullock, 1 July 2021, page 20).
I can understand the use of these nudge letters in that context as HMRC might not want to disclose to the taxpayer precisely what information it holds in case the taxpayer also has several other offshore income sources that HMRC is not yet aware of – in that circumstance I can understand that HMRC could prejudice their interests by disclosing their full position up front.
However, I don’t understand why this approach is appropriate to CJRS claims. The whole purpose of the CJRS was to help businesses to survive the unprecedented economic crisis of 2020-21. If any errors have been made in making claims under the CJRS, surely HMRC should help taxpayers to correct these errors, rather than taking the approach that we are seeing in the above letter? The current HMRC approach would appear to slow down the process of recovering any overpaid CJRS grants from employers, while also maximising penalties payable to HMRC in the event that taxpayers are unable to find the ‘needle in a haystack’ which is the error in one of their many CJRS claims.
In summary, our plea to HMRC is to provide information to taxpayers about what it believes may be wrong with their CJRS claims so that the taxpayer can investigate these potential errors promptly and bring the matter to a swift conclusion.
A Taxation reader.
Taxation approached HMRC about whether it was its practice to send nudge letters in relation to CJRS claims. In response, an HMRC spokesperson said:
‘To address your questions, we aren’t sending these letters to all those who have claimed CJRS – this is not a fishing exercise on our part. We have written to employers where the information we hold suggests there may have been a mistake on their CJRS claim. For example, claims may be significantly different to the PAYE information provided to HMRC for recent months.
‘We want these employers to check their claims and to tell us they’ve made a mistake or call us to discuss if their claim was correct.’
