CJRS message from BDO - common risks/errors

BDO have recently emailed their university clients to warn them about HMRC’s compliance activity on CJRS, their findings from risk reviews and the top errors within the sector.  They have shared the email with BUFDG and we have reproduced below.  Whilst, of course, there is a certain amount of selling here with their triage tool, it is interesting to see the most common errors and hopefully it will help universities with any risk review of their own CJRS submissions.

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As I am sure you are already aware, the government’s CJRS furlough scheme has now been closed for 8 months (since September 2021). Whilst the scheme is now closed, HMRC has increased its compliance activity with nearly 1300 staff deployed onto reviewing CJRS claims with a target to recover £1billon over the next 2 years.  In addition, as part of their compliance activity, HMRC have issued ‘nudge’ letters asking employers to check their CJRS claims. Employers are also required to report on CJRS payments through their tax returns (CT600) and with HMRC’s CJRS enforcement rules and powers it is more important than ever to ensure that your claims were correct.  Since the introduction of CJRS in March 2020, there have been over 420 updates to the original guidance and rules. This is a complex scheme and the frequent evolutions to the rules present real challenges to businesses.

The sorts of areas we seeing that can give rise to errors and risks include;

· In calculating CJRS reference pay for fixed pay employees, using 1/12th of annual salary as opposed to the actual figures from the February 2020 payslip.

· In calculating CJRS reference pay for fixed and variable paid employees, not all relevant pay elements have been factored in or out of the calculation correctly (such as car allowance, shift allowance, overtime, commission)

· From July 2020, changes to the guidance have not been followed whereby the NIC reclaim calculation changed from the ‘Total Pay Method’ to the ‘Adjusted Threshold Method’

· Salary sacrifice has not been treated correctly, either by not adjusting reference pay or by deducting sacrificed amounts from the furlough grant paid to employees – this can result in an overclaim by the business and/or an underpayment to employees

· Where additional non-furlough payments have been made to employees while on furlough (such as holiday top-up payments), the NIC reclaim calculation has not been adjusted accordingly in the first version of CJRS (from March to June 2020)

· Where employees were not furloughed for a full claim period, NIC reclaim calculations have not been adjusted accordingly (from March to June 2020)

· In calculating CJRS for flexi furlough, holiday hours being treated as worked hours as opposed to furloughed hours (including bank holidays)

· In later versions of CJRS, employers have claimed furlough for employees serving their notice period

As a result, and with HMRC’s increased activity in this area, we have been helping clients by carrying out a ‘CJRS risk review’ whereby we review the approach and methodology the business has adopted in relation to CJRS to identify any potential areas of risk. The purpose of the CJRS risk review is to understand the approach the HEI has taken in relation to CJRS and report back on any comments and recommendations for any next steps based on any potential risks we identify. Before undertaking any review we would first be asking a series of questions using our triage tool, which we can use initially to risk review your claims and based on the outcome of this we can identify whether the HEI is low, medium or high risk in terms of claims made. 

Once the triage tool has been completed we can discuss our findings with the HEI and discuss whether a sample review of claims or further action may be advisable. If this is something that you may be interested in please contact Caroline Jones (Director, Employment tax) or me.