Employers face penalties if they misuse furlough scheme

HM Revenue & Customs has rejected more than 30,000 applications from employers wishing to access the Coronavirus Job Retention Scheme, according to research carried out by The Times.

The newspaper says HMRC believes many of the applications may have been attempts to defraud the system, in which the government pays a percentage of the wages of workers placed on furlough leave due to Covid-19.

HMRC also has concerns that some employers may have claimed more than their entitlement or may not have abided by the scheme’s rules.

A study carried out by Cambridge University found that one in five workers on the job retention scheme have been asked by their employer to break the rules.

Nearly two out of three employees have admitted to continuing to work from home while on the scheme.

The report said that “more than 60% of furloughed employees report doing some work, with a 42% reduction in weekly hours on average.”

The government is introducing legislation that will enable HMRC to target companies submitting incorrect or fraudulent claims relating to their employees. Those found to be abusing the system will face penalties for any deliberate non-compliance. 

Most abuses involve employers claiming furlough money for employees who they have kept at work. This is forbidden under the scheme, which allows employees to undergo training but not to do any work on behalf of the company.

Employers who feel they misunderstood the scheme and so inadvertently misused it are being given a 30-day grace period to inform HMRC without fear of incurring penalties. Any organisation that doesn’t admit to any misuse could face significant fines, as well as risking reputational damage if they are named following investigations.

A spokesperson for HMRC said: “We are now starting to investigate claims in depth, paying particular attention to claims that are out of step with the payroll data that we hold.”

Please contact David Rushmere if you would like more information about the issues raised in this article or any aspect of employment law.