Motor retailers that accessed the Government’s furlough scheme are being warned by BDO to respond to compliance ‘nudge letters’ as HMRC homes in on incorrect claims. As the Coronavirus Job Retention Scheme (CJRS) came to an end on 30 September 2021, HMRC is requesting confirmation that claims made are correct and motor retailers need to act now.
Since the introduction of the scheme back in March 2020, CJRS has supported nearly all motor dealerships and groups with employment related costs as they dealt with the impact of COVID-19. There have been many changes to the scheme, including the level of support, the costs that can be claimed, which employees can be included and the ability to come back to work part time under the flexible furlough arrangements. Through each of these changes, employers have had to review or adjust the calculations behind their claims whilst working in an ever-changing landscape.
A change of focus
HMRC are now turning their focus from administering claims and payments to compliance reviews. The current focus is on fraudulent claims, but it is anticipated that this will increasingly shift to claims where genuine errors have been made.
A taskforce to review claims has been established and a campaign commenced requiring companies that have submitted claims and that have received a “nudge letter” from HMRC, to provide confirmation that claims are correct or otherwise supporting information regarding the claims they have made. The campaign requires each company to respond, whether there is an issue or not, therefore the letters should not be ignored.
Chris Bond, BDO’s motor retail tax partner explains:
“As the motor retail industry responds to the easing of lockdown rules, adjusting workforce levels and moving towards full reopening, it’s definitely the right time to review claims made to ensure they are correct so that any review by HMRC goes smoothly.
Key areas of risk that can make claims complicated include variably paid employees such as those with contractual commission/bonus/over time, non-monthly pay periods (ie. weekly, fortnightly or four weekly), use of flexi furlough, salary sacrifice, multiple PAYE schemes and addition of new employees into claims from November 2020. Any review that results in an under or over claim of CJRS will need to deal with how to correct this.
Laura Brown, employment tax specialist in BDO’s motor retail team adds:
Whilst there is likely to be concern from dealerships about over claims of CJRS, if employees have been underpaid through an error in the calculation of reference pay, this can invalidate the compan';s full claim. It is therefore important to review the claims made and correct any errors as soon as possible.
It is also good practice to ensure that the documentation behind the steps taken when the employer calculated claims is maintained: this includes documenting any reviews undertaken and the outcome of these.
Whilst CJRS is coming to an end, HMRC's focus on furlough claims made by employers is only just starting.