Compliance
don’t know if furlough will become a permanent part of our role. However, it is incumbent on payroll teams and leaders to remain close to guidance and legislative changes, and work with software providers to ensure that should we need it again we’re able to continue to keep the UK paid. CJRS audits The TPPT will look to payroll teams over the coming months and years to understand how businesses remained compliant with the complex and challenging guidelines and legislation surrounding CJRS. The TPPT is designed to target deliberate fraud, and its consistent message is that it is not looking to investigate genuine mistakes. Of course, the onus will be on payroll teams to demonstrate how they implemented systems, processes, and compliance checks to evidence that there was no fraud taking place. In May 2021, the TPPT issued 10,000 letters to employers who they believed may have made mistakes with their claims, urging them to check their claims, to confirm to HM Revenue & Customs (HMRC) if they had overclaimed and to repay any amounts due. Employers that did not satisfy the TPPT query will inevitably face further investigation in the future. An early part of the CJRS guidance confirmed that employers should retain their furlough records for six years, including: ● the amount claimed and claim period for each employee ● the claim reference number ● calculations for the claim ● usual hours worked, including calculations for flexibly furloughed employees ● actual hours worked for flexibly furloughed employees. In addition to the above, employers should also have evidence of the change in the employee’s employment status, changing them to become a ‘furloughed employee’. Employers would also be encouraged to maintain process records to show how they ensured employees did not work during furloughed periods. Whilst the TPPT is currently focused on deliberate fraud, HMRC has the power to issue penalties where employers were in receipt of a grant to which they were not entitled. The onus sits with the employer to check their claims are accurate, and employers have a set timeframe to repay once an error is identified. Some have commented that this
approach deters employers from checking claims, since the onus of repayment only appears when the employer finds out about a mistake. However, HMRC has made it clear that where employers are unaware of an overclaim, no penalty will be charged providing that the amount is paid back in the relevant time period. That time period ends on 31 January 2022 for sole traders or partners, and for organisations it ends twelve months from the end of the accounting period. HMRC is giving employers time to review and check claims for accuracy. There is clear acknowledgement that mistakes can happen; however, payroll professionals should not assume that this provides them with reassurance not to audit the accuracy of claims made. The retention requirements of six years offer a clear indication that, whilst initial inspections will be looking to combat fraud, there is still potential to revisit claims where genuine errors resulted in overclaims. ...ethical question of whether it is right for businesses that turned a significant profit to retain this funding... A chain reaction Though September may bring an end to the CJRS, the knock-on impact that the scheme has had will continue to be felt for months, and possibly years to come. Women who have been furloughed who go onto maternity leave must have their average weekly earnings calculated based on their normal pay, not their earnings under the CJRS. This will mean that payroll teams will need to consider earnings in the qualifying period and whether or not they have been impacted by furlough. This can be particularly complex when working with flexible furlough or individuals who work variable hours. Unfortunately, termination payments will be an inevitable calculation across many payroll teams, and payroll professionals must ensure that redundancy payments are reflective of the employee’s normal earnings, not their furloughed rate of pay. For those
on notice of termination, they should not be furloughed during the notice period as it will not count towards their notice entitlement. Reduced earnings through furlough periods have potential to impact the P60 certificate figures for three tax year ends. Anecdotally, employees are already seeing problems created by this when applying for mortgage applications. Banks have confirmed that mortgage applications will be possible, but eligibility would be based on furloughed income. The ethical picture In 2020, many employers opted to use the CJRS in the midst of an uncertain economic outlook, but since then employers, such as Halfords, Ikea and Primark, have been reported to have repaid their CJRS claims. In these businesses, the financial impact of Covid was not as significant as first predicted, which made repayment a viable option. CJRS is not limited to organisations that have suffered a financial detriment due to the pandemic. Companies that left 2020 in a positive financial position are not being asked to return funds received; however, businesses such as XPO logistics have already come under fire for paying out large amounts of bonuses whilst having received millions of pounds in CJRS claims. The ethical question of whether it is right for businesses that turned a significant profit to retain this funding is likely to continue to make headlines in future. Given the level of debt the UK has incurred, I would suggest that companies that find themselves in a similar situation look to the heart of the scheme – to save lives and livelihoods – and consider whether the scheme has enabled this, or whether it has simply created a healthier bottom line. Final summary Payroll professionals will not be able to turn off the lights on CJRS when (or if) it ends in September. The wider implications on audit, statutory payments and the unknown potential for future schemes will be just some of the considerations for payroll teams across the UK. The economic impact of CJRS goes further still – the debt built up by this scheme will be paid back for generations to come. For that reason, businesses should be encouraged to review their claims with hindsight, in the wider context of their year end position and to consider whether the example set by Ikea, Halfords, and Primark is something they could follow. n
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| Professional in Payroll, Pensions and Reward |
Issue 72 | July / August 2021 Issue 73 | September
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