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Have you overclaimed under the Job Retention Scheme?

Have you overclaimed under the Job Retention Scheme?

HMRC have issued guidance on how employers should correct any amounts which have been overclaimed under the Job Retention Scheme.

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Employers can now notify HMRC of any amounts overclaimed under the Job Retention Scheme (JRS) and offset the relevant sum against a subsequent claim. HMRC are working on a system to allow employers to notify HMRC of any overpayments discovered after the employer’s last JRS claim was made.

What’s the change?

Until now, there has been no mechanism for employers to correct errors on their JRS claims after submission. This was the case for calculation errors, as well as for data input errors such as including an employee on the same claim twice.

HMRC have now announced that the JRS portal has been updated to allow employers to correct errors made on previous claims where this has led to the amount due being overclaimed. Employers can tell HMRC if they have over-claimed in a previous claim and the new claim amount will be reduced to take this into account.

HMRC are working on a process to allow employers to correct an overclaim where the employer does not intend to submit any further claim. Employers should note that there is currently no formal process to allow employers to update claims where the amount due has been under-claimed in error.

What action should employers take?

Where employers discover an error which has resulted in an overclaim of the amount due under the JRS, they should report this to HMRC on their next claim. Employers may also wish to review submitted claims to ensure their calculation of the amounts due is correct. Draft legislation, which was published for consultation, will give employers a short period after Finance Act 2020 is passed to notify HMRC of any amounts to which they are not entitled before the overpayment is recovered by way of an income tax charge (with the potential for interest and penalties). Thereafter, overclaims would need to be reported to HMRC within 30 days of arising. Employers should therefore rectify any overclaim errors as soon as possible. Records of these adjustments should be retained for six years.

What should employers think about?

The calculation of the grant due under the JRS is already complex, and care should be taken to ensure that the calculation is correct. Additionally, the rules surrounding the introduction of flexible furlough  will add even more complexity to employers’ claims, which may lead to more errors being made.

Employers should, in particular, be aware of the following points when preparing their calculations and considering whether any historical claims need to be corrected:

  • The application of HMRC’s guidance, which has changed a number of times since the JRS was launched, and which in some cases has resulted in a change to the level of grant that should have been claimed (notably in relation to the calculation of employer’s NIC which can be claimed in certain circumstances);
  • Including ineligible pay elements in the calculation of reference pay, for example, tips;
  • Incorrect treatment of salary sacrifice arrangements when calculating reference pay;
  • Incorrect classification of an employee as being paid at a fixed or variable rate when calculating reference pay; and
  • Incorrectly calculating the employer NIC claim or pension element of the claim in cases where employees’ furlough pay is topped-up by the employer.

For further information please contact:

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