The Coronavirus Job Retention Scheme (CJRS) may be closed, but paperwork and record-keeping requirements remain.
The Coronavirus Job Retention Scheme (CJRS) or furlough scheme officially ended on 30 September, with businesses having until 14 October to claim for furloughed wages during September. The scheme and its variations which ran from March 2020 to September 2021 enabled employers to retain staff during lockdowns and temporary business closures, paying up to 80 per cent of employees’ wages.
Latest government figures show that by 14 September 2021, 11.7 million employee jobs had been furloughed through the scheme, costing £69.3 billion, with the numbers of staff on furlough peaking during June and November 2020 and January 2021.
But with the final closure of the scheme, businesses now have the task of wrapping everything up, yet there has been very little guidance on how to go about this. Businesses will need to consider:
- The return-to-work process.
- Notifying employees of any contractual employment changes.
- Repaying overclaimed grants.
- Accuracy and clarity of record keeping.
We spoke to several accountants across the UK for their advice on how to sort out their furlough-related housekeeping.
Review every claim to ensure compliance and accuracy
Andy Hamman, Employment Tax Director at audit, tax, advisory and risk firm Crowe
Employers that claimed under the CJRS scheme have vital housekeeping to do.
HMRC has already started enforcement action against employers who have submitted incorrect claims. Employers will have to repay overclaimed grants and face penalties of up to 100% of the overclaimed amounts.
Next steps: We would encourage employers to review their claims for the most recent months. Any amounts overclaimed can be paid back without penalties as long as these amounts are repaid within 90 days from the original grant date. Employers who identify any errors and voluntarily disclose these to HMRC are also more likely to receive reduced penalties.
Employers should also ensure that any previous changes to employment contracts due to the furlough scheme are now reverted and accurately reflect the terms of the post-furlough employment.
Verdict: Review all claims since the start of the scheme and speak to their advisors if they need any assistance.
Keep all records associated with furlough claims including payslips
Iain Black, MHA Monahans
Now CJRS deadlines have passed, companies must look forward and ensure they are prepared for potential HMRC investigations. Due to the sheer amount of furlough claims, it is likely that HMRC will undertake targeted checks, especially in cases where a business wasn’t significantly impacted by the pandemic but still made claims.
For most businesses, the use of the furlough scheme will have been completely valid and no action will need to be taken. If a business receives a letter of investigation, it doesn’t necessarily mean they’ve done something wrong. Accountants can support their clients by helping to review claims and accounts and advise on the best course of action.
Next steps: Businesses need to ensure they have kept all records associated with all furlough claims, including payslips of furloughed employees and enough information to support the decisions made to furlough staff in the first place.
Verdict: HMRC may make targeted checks on businesses over the next few years – ensure records and information are easily accessible and orderly to justify claims.
Ensure records are thorough, detailed and show calculation methodology
Mahmood Reza, CEO of ProActive Resolutions
Furloughing is effectively employee hibernation. CJRS was the money to support it.
Accountants can support clients to ensure their housekeeping is in order in case of HMRC investigation by ensuring the business has:
- Reviewed procedures, processes, and calculations for all submitted claims.
- Consulted and discuss with staff over any changes to employment contracts.
- Confirmed to employees in writing that they are required to return to work.
- Kept records of each employees’ working hours plus furloughed hours for six years.
- Calculated methodology and workings for how much you claimed.
- Calculated methodology for calculating regular pay.
Companies also need to disclose relevant furlough-related figures on company tax return, CT600. This is the total amount of CJRS grant payments in the accounting period covered by the return. Overpayments also need to be disclosed.
Next steps: Try not to panic. Acting reasonably in interpreting HMRC guidance, claim preparation and submission gives you a good defence against penalties for overclaiming.
Verdict: Ensure records disclose every detail relating to furlough and staff are consulted on any employment changes.
Review post-furlough cash flow to help determine impact and future strategy
Jamie Skelding, Director, Prime Accountants Group
There was no definite process for ending the furlough scheme unless the individual furlough agreement provided one.
However, employers should have given their furloughed employees reasonable notice that they were required to return to work and provided all the necessary details of any new or existing working patterns. Staff should also have been consulted in advance with time to address any difficulties or concerns.
Changes to working patterns – which must be consulted on – may include:
- Reducing employees’ hours/days of work due to downturn in work.
- ‘Private’ furlough/lay-off/short-time working.
- Hybrid working/staff work from home.
Furlough ending may also have mean redundancies, but there are some alternatives that an employer may wish to consider first such as temporary or permanent redeployment to another business area, unpaid leave, reduced hours due to the temporary downturn of work and/or short-term or long-term pay reductions, which must be agreed by staff by written consent.
Next steps: With the scheme’s closure, it’s good practice for employers to revisit plans and look at their cash flows to determine the effect of the lack of furlough since the start of October.
Verdict: Revisit plans and look at cash flow post-furlough to determine impact and future strategy.
Annie Makoff is a freelance journalist and editor.