Furlough has ended but potential liability for overclaiming has not.
This is in the news again after the BBC’s File on 4 and The Times obtained secret recordings appearing to show managers at a recruitment company telling staff how to avoid detection while they continued to work. The company, Brewster Partners, which is based in Yorkshire denies any wrongdoing but on the face of it, it doesn’t look good. The footage is on the BBC’s website for all to see – here it is:
Video – BBC report
The upshot of that is the company said it would refer itself to HMRC for investigation – presumably that has now happened and the Revenue will be conducting a thorough audit of that business.
Of course, HMRC will investigate suspected fraud, but it will also investigate inadvertent mistakes which is the concern for the vast majority of employers who would never entertain fraud on any level, but which might have overclaimed furlough monies without realising it. How could that happen? The answer lies in the scheme rules which say employees cannot be on furlough and also be working. The guidance, which has now been withdrawn, says: ‘During hours you are on furlough you will not be able to work for your employer. Your employer cannot ask you to do any work for them that: makes money for your employer or a company linked or associated to your employer, or provides services to your employer or a company linked or associated to your employer. Training and keeping in touch is acceptable, but working is strictly prohibited.
That raises the question, how do you distinguish between ‘work’ on the one hand and ‘training and keeping in touch’ on the other? Doubtless there will be plenty of grey areas where it’s not clear whether someone was working or not, so should employers be looking back and checking? It’s a question I put to Anne Sammon who joined me by video-link:
Anne Sammon: “So I think it's always a good idea to have kind of carried out some checks to see whether or not you were properly claiming for furloughed monies and the extent of those checks is likely to depend on the nature of your business and the way in which your employees operate. So for example, if you are in a factory it's very easy to see whether people are on the shop floor or not, the checks that you need to run in that situation are much more limited than where you've got lots of people who might have the ability to work from home who might have been accessing emails remotely.”
Joe Glavina: “Under the furlough rules employees were not allowed to work, not allowed to ‘provide a service’. But you will have had some people responding to emails, joining Zoom calls and so on, so where do you draw the line?”
Anne Sammon: “I think it's really challenging and I think part of this is a question of degree. I think somebody's responding with a with a one liner to an email, whilst it might technically be classed as work, whether HMRC is going to be particularly concerned about that kind of one off example, seems, to be relatively low risk. Whereas an employee who responds to requests from a from a client, for example, with a with a much longer in depth response, that's likely to be more problematic. Ideally, all employees would have put on their ‘Out of Office’ email responses, so therefore, wouldn't have been responding to any of these things but we all know that sometimes these things do slip through the net. The other difficulty is that employers were obviously allowed to keep in touch with employees and keep them updated on in terms of what was happening with the business. So somebody joining a call for that purpose wouldn't necessarily have been classified as working under the furlough rules, and it’s that kind of difficult balancing line. One of the things that we've seen with some organisations, it's almost about frequency, how many emails has the individual sent, and then doing an analysis of, well, this person seems to send a lot of emails, or more than we would expect them to have done, now let's look at the content once we've once we've kind of got through that first red flag.”
Joe Glavina: “Finally Anne, last time we talked about this subject was in the middle of furlough and you were recommending clients consider using the Pinsent Masons’ 'forensic review tool' to help identify any underpayments and assess the risk to the business. Now that furlough is finished does that tool have any relevance?”
Anne Sammon: “I think that tool is still incredibly useful for employers that might want to just double check, now that these issues are in the spotlight again, that they're comfortable that their employees were complying with all the rules and that they didn't have people working. I think one of the things that we've seen from the clients that we've spoken to is that where there has been any kind of abuse of the rules, it has been ad hoc and one off individuals or one off teams who've done it rather than any kind of direction from senior management to do these things and, therefore, without going through the process of some sort of audit, or using the tool that we have, it's quite difficult to identify those issues and businesses might have no idea that that some of their staff have abused the rules.”
If you do think your business may have overclaimed furlough monies it may be worth reading the paper Anne published back in March, co-written with tax and fraud-litigation specialist Andrew Sackey. It is called 'Furlough overclaims and essential next steps for employers' and will point you in the right direction. We have put a link to that paper in the transcript of this programme.
- Link to guidance by Anne Sammon and Andrew Sackey on furlough overclaiming