There's now just under a month of grace left during which companies can confess to furlough fraud without being fined.

Under the new Finance Act 2020, they have until 28 October to return money wrongly paid out under the Coronavirus Job Retention Scheme (CJRS).

ONS figures show that construction companies have claimed more than £3.2bn in furlough payments. Inevitably, some will have mistakenly fallen foul of the fast-moving complexities of the pandemic situation. Others will have deliberately taken advantage of the situation by making false claims for staff who had already left the company, or by having supposedly furloughed employees carry on working.

Many companies will be affected. An academic study published in August suggested two thirds of the UK's furloughed workers may have continued to do their job during lockdown. HMRC received around 8,000 anonymous tip-offs from whistleblowers claiming their employer committed fraud by keeping people working, and at least one person has been already been arrested in connection with CJRS fraud. UK companies have already voluntarily returned more than £215m in furlough payments but officials say up to £3.5bn may have been wrongly claimed.

Criminal prosecutions inevitable

HMRC has taken the unprecedented step of allowing a moratorium period in which companies can declare any anomalies such as inadvertent or negligent furlough claims. If so, they won't be penalised on their CJRS-related tax calculations. However, HMRC is likely to pursue companies that haven't declared anomalies by the end of October. There will inevitably be criminal prosecutions and public opinion is likely to support tough action.

"If you do come across a rule break consider, in the round, whether you as a company might be able to explain it to HMRC"

It is understandable that, at the start of the CJRS scheme, construction companies rushed to register claims. They wanted to stand by their employees and also protect their viability in a period of extreme uncertainty. But now that the CJRS is being replaced by the chancellor's Job Support Scheme, this is the time to take stock, double-check that the amounts claimed were correct and repay any wrongful amounts.

It may be inconvenient and time-consuming to verify what actually happened during furlough in each of your teams. But the risks of finding out after 28 October that you've inadvertently breached the rules far outweigh the inconvenience. And if you find out now, you may even be able to make a case to HMRC that you shouldn't have to pay the money back.

What to do

The first thing to do is to check and re-check any CJRS claims that you have made against headcounts and the hours recorded as being worked during the furlough period. Then put together a return-to-work checklist for all employees who are coming back from furlough. Include the question: 'Were you asked to carry out any of your duties while you were on furlough?'

Next, ask all your managers to candidly set out the extent to which they asked any furloughed employees to carry out work-related tasks during lockdown. Explain that frank answers to your questions now will help avoid costly and embarrassing issues later.

If you do come across a rule break consider, in the round, whether you as a company might be able to explain it to HMRC. Providing the tax authorities with a detailed document that explains the background to the information that you've volunteered might persuade them to take a more lenient approach to your case.

Omissions and errors can occur in even the most efficiently run businesses. The potential risk for companies finding out too late that they had inadvertently breached the rules far outweigh the inconvenience of carrying out some checks now.

It is highly unlikely that ignoring the issue now will be prove wise in the medium to long-term.

Originally published by Construction News on the 2nd of October, 2020

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