HM Insights

Extending furlough? Repaying furlough? Recent developments and words of caution

Since lockdown began in March 2020, many employers – and employees - breathed a sigh of relief with the introduction of furlough and the coronavirus job protection scheme (CJRS).  Available with comparative ease, grants paid by HM Government have helped many different employers and employees across the economy, to maintain employment.  With the anticipated ending of the scheme as we know it on 31st October 2020, there looms a number of decisions to be taken within businesses affecting workplaces throughout the UK, with difficult and risk-laden choices to be made.  Recently, we've seen a number of developments that all employers need to be aware of, to monitor and to factor into their thinking.    

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Should Furlough be extended?

Andrew Bailey, Governor of the Bank of England, recently publically echoed remarks made in Scotland and asked if the scheme should be continued, to assist sectors most badly hit by the ongoing pandemic and economic distress, suggesting that it could be used to prop up businesses which are most badly affected and in doing so, have an economic benefit.  Certainly, if the original intention was to help employers avoid dismissing people, keeping people in employment, providing a level of support and keeping money in the economy, even if predominantly funded by HM Government, the scheme intended to both protect employment and support businesses in the economy in which people would spend their income.  Now, the turning off of the furlough tap would suggest that many employers and employees are staring at unemployment, reduced work or businesses not succeeding if no change is made to reduce overheads, with the stark reality forming that there is unlikely to be anywhere near to the same level of business and economic activity across all walks of business life as we head through a very difficult winter.  Whether a political decision is made to offer extended or targeted support, we will need to watch carefully.

Affordability and abuse of the scheme

Affordability and abuse has been part of recent scrutiny of the CJRS, with many commentators speculating that the scheme's continuation is unlikely in a similar form, due to affordability, and due to concerns around the use, or abuse, of the scheme by some employers.  HMRC has already started to issue letters to certain employers notifying them that they may not have adhered to the rules of the scheme, seeking to implore employers to pay back to HMRC monies that have been wrongly paid. 

Some employers have already made repayments, determining that they are content to repay monies that have been correctly claimed, but which are not to be retained, due to their better than expected ability to have weathered the storm of COVID-19.  Media reports that over £200m has been repaid.  It is not clear if this sum is included in the £3.4bn estimated over-claimed monies that HMRC is looking to clawback, by writing to employers at the apparent rate of 3,000 per week at present. 

What to do if you're contacted by HMRC

If you receive one of these letters, you really must look to take advice as soon as possible because whether and how you choose to respond may have a significant impact on the stance HMRC adopts in relation to your use of the CJRS scheme.  There is, after all, every ability for HMRC to undertake a significant investigation, be that now, or up to 5 years from now, in relation to any employers use of the scheme.  Keeping records, not just as to the need to use the scheme, but also as to demonstrate that workers did not carry on working in any material way during furlough, will be important. 

With HMRC seeming to suggest that they think there are over 27,000 "high risk" claims, and with powers to fine and apply interest to sums deemed incorrectly claimed, it's important for employers to take immediate action to review their use of the scheme and ensure that any issues are discussed with advisers now, before determining a strategy to manage any concerns.  Pay particular note to any date for responding and repaying any sums sought.   

Get in touch

If you have any queries please don't hesitate to contact one of the employment team to discuss further.

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