Over-claimed furlough grants
Jul 09, 2020
Calculating the amount you are eligible to claim through the Coronavirus Job Retention Scheme is a tricky business, and you may have accidentally over-claimed for your grant. Navigating the variations caused by holiday pay, sick pay, flexible furlough, pay periods and ‘normal hours’ has proved incredibly challenging. It’s new for everyone, so it’s probably no surprise that occasional errors may occur.
If a mistake has resulted in you claiming more grant than you are entitled to, you need to notify HMRC and arrange to pay this money back. Alternatively you can correct it in your next claim, so that you receive a smaller grant next time. A new law has been passed which clearly states that the onus is on the taxpayer to notify HMRC if they have over-claimed a CJRS grant, and this must be done within 90 days of the law receiving Royal Assent (so by 20 October 2020) or within 90 days of receipt of the grant, whichever is the later. If you fail to do so, HMRC will treat the non-disclosure as deliberate and concealed, and the ensuing penalties could be as much as the entire amount over-claimed.
How to pay back HMRC if you’ve over-claimed
When you make your next furlough claim you will be asked whether you need to reduce the amount to take account of a previous over-claim. Your new claim amount will be reduced to reflect the over-claimed amount, and you should keep a record of this adjustment for 6 years.
If you are not making any further claims then you should contact HMRC and arrange to make a payment for the over-claimed amount. HMRC will give you a 14- or 15-digit payment reference number that begins with X, which you then need to use when making an online bank transfer into HMRC’s account.
Communicate with your employees
If an over-payment has been made, you’ll need to recover it from your employee’s earnings via a deduction from their future salary payments. You’ll need to agree this in advance with your employee.
You may not be aware at this stage that an error has been made, as it might be some time before claims are reviewed and mistakes highlighted. So encourage your employees to check their pay slips, and ask them to tell you if they see anything that doesn’t look right or they see an over-payment.
Associated tax deductions
You’ll also need to watch out for whether the correct tax deductions have been made for student loans, National Insurance and pension contributions. Usually these will be in relation to the amount of gross furlough grant which is paid, and they will balance out as corrections are processed in subsequent pay periods. However in some cases the wrong tax code may have been used, and incorrect deductions could also mean an employee moves above or below their relevant tax threshold, affecting the amount of pay they receive.
Remember it is important to notify HMRC if you realise you’ve over-claimed through the CJRS. The Revenue will be retrospectively auditing furlough claims, and employers will not only have to pay back any sums owed but may also be subject to additional penalties.
If you have any queries, or you’re concerned about errors in your furlough claims, then please get in touch with the team and we’ll be happy to help.