Furlough fraud can occur in the following ways: any amount the employer was not entitled to receive; or any amount the employer is no longer entitled to receive after a change in circumstances – e.g. one of your client’s employees who is no longer employed by them is still having their wages claimed for under the JRS.
Organisations will not be charged a penalty if they notify HMRC 90 days after the date they received the overclaimed, or overpaid, amount that they were not entitled to; or after they stopped being entitled to retain the amount they were paid because of a change in circumstances, or they have not used the payment for its intended purpose (e.g. to pay staff wages).
The penalty set-up considers deliberate and non-deliberate behaviours of furlough fraud, as well as whether the organisation was prompted to notify HMRC.
For non-deliberate behaviours that were unprompted:
- unprompted and HMRC is notified within 12 months of tax being due = 0% to 30% of the ‘potential lost revenue’ (PLR – the amount that is unpaid as a result failing to notify)
- unprompted and HMRC is notified 12 months or more after tax was due = 10% to 30% of the PLR
For non-deliberate behaviours that were prompted:
- prompted and HMRC is notified within 12 months of tax being due = 10% to 30% of the PLR
- prompted and HMRC is notified 12 months or more after tax was due = 20% to 30% of the PLR
For deliberate behaviours:
- where the notification was unprompted = 20% to 70% of the PLR
- where the notification was prompted = 35% to 70% of the PLR
For deliberate and concealed behaviours:
- where the notification was unprompted = 30% to 100%
- where the notification was prompted = 50% to 100%
The Government has emphasised that any overclaimed grant payments must be repaid, and organisations can do this by repaying any monies owed to HMRC in their next furlough claim, or by contacting HMRC directly if they will not be making further claims.
If organisations repay any overclaimed payments in their next claim, they should notify HMRC of the amount that has been overclaimed as an additional step to making a new furlough claim. Any new grant payments made to them will reflect the deductions made due to previous overclaimed payments. Organisations should then keep a record of this for six years.