HomeHMRCSmall firms face fines for inaccurate furlough claims

Small firms face fines for inaccurate furlough claims

Small business owners unaware they have over-claimed could face having to repay 5-10% of furlough claims, according to accountancy firm MHA.

HMRC and the National Audit Office estimate that 5–10% of furlough money claimed could represent overclaims.

Nigel Morris, employment tax director at MHA, said innocent errors and incorrect claims will be pursued for many years by HMRC. 

He is advising small businesses to check their claims in detail. They should repay any overclaims through the Government website before HMRC hits them with interest and penalties. 

Flexible furlough claims an issue 

The most common slip-up made by companies has been forgetting to work out claims for flexible furlough on calendar days (365 a year). Instead, they have based their sums on working days (260 a year), which they might use for the rest of the payroll, MHA said.

Small business owners should also ensure that their auditors, bankers and investors are aware of any potential clawbacks. If the clawbacks are not budgeted for, companies could end up in breach of borrowing and covenant requirements when they are called on to pay HMRC off. 

Morris said: “The furlough scheme was a great success in preventing mass redundancies until the economy rebounded. Yet the scheme was complex from the start and kept getting more complicated with various amendments and extensions made by the Government. Administrative challenges were usually overcome but at a high cost to many employers.

Businesses encouraged to review all claims 

“The advice to all businesses, as the scheme ends, must be to review all their furlough claims and ensure that if they have over-claimed, they make arrangements to pay HMRC back as soon as possible.

“Furlough was a blessing at the time: you don’t want it turning into a major administrative and financial nightmare down the line.”

The Government will have spent over £70bn on furlough once the scheme ends on 30 September. At its peak 8.9m people were on furlough; the current figure is 1.9m.

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