Anyone remember Furlough?!

Of course you do. Now the focus is on furlough fraud, and one of the first judgments has been released that deals with misuse of the Coronavirus Job Retention Scheme (CJRS).

In Carlick Contract Furniture Limited v HMRC, the First-Tier Tax Tribunal considered furlough claims that the employer made for two recently employed employees who were not eligible, due to their only being paid for the first time shortly after the CJRS started. The employers argued they had considered the employees to be eligible (as arguably they appeared to be so under the first version of the CJRS guidance that was issued, though clearly were not under the second version), or at least the claims were "in the spirit of the support" that was intended, given the ever-changing and complex rules that were in place at the time. The Tribunal accepted this was a case where the employer's claims were invalid due to a technicality rather than a flagrant attempt to claim fraudulently, but concluded that it had no jurisdiction to entertain arguments about the "spirit" of the CJRS, the legislation was sufficiently clear and the employer must repay to HMRC the furlough grants received.

In ordering the employer to repay £20,504.25, being the total sum of the furlough grants received for the two employees in question, the judgment will be of great assistance to HMRC in the many future cases where one can expect employers to often run a defence based on either a misunderstanding of the CJRS guidance/law in force at the time or that their actions were within the spirit of the CJRS.

With HMRC estimating that £5.5 billion was paid out fraudulently or as a result of errors and that they are investigating 14,000 whistle-blower reports received, we can expect this judgment to be the first of many.

It is not too late for any employers who remain concerned about their furlough compliance to audit and review their claims and record keeping. It is clear that the Courts will take a firmer stance against businesses who have not taken their opportunity to audit their claims or have failed to disclose any issues to HMRC.