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Client made a slight mess of furlough. How to fix?

Salary used for furlough claim different to RTI. Client error, but what is the best way to fix it?

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I wonder if I could ask the network about a client I have who’s made a bit of a mess of their furlough claim.

Their year end is July. Looking through their accounts I can see that the salary they paid themselves for a few months was about £900 whereas I had been processing their payroll on the basis of £732/738. Not quite sure why the did that but never mind.

Ordinarily I would just adjust the difference to their directors loan account, however they have gone on to make furlough claims on the basis of the incorrect salary. The client recognises that it is a mistake and that HMRC will eventually join up the RTI with the furlough claim and spot that it is incorrect as well. They have asked me to go with whichever option is most by the book (thankfully).

The options as I can see it is to

  1. Do an earlier year update for PY and update CY in next RTI submission to adjust their salary to what they actually paid/based furlough on.
    The problems are that it will incur some tax, but also looks rather a lot like they have changed their historic salary to get more from furlough. However it does match the cash that they have paid so could be justifiable and is what they thought their salary was.
  2. Keep the payroll as is but tell HMRC of the error in furlough and adjust accordingly, likely through the CT600. They would owe back some of the furloughed pay. Not sure if they would get into trouble for this “careless error”

I’m erring towards option 2 but would be very interested to hear if others have had similar situation, what they did and what comeback, if any, there was from HMRC as a result.

Replies (23)

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RLI
By lionofludesch
13th Aug 2021 14:41

I vote 2.

Altering the payroll to fit the furlough claims is asking for trouble.

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Replying to lionofludesch:
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By Hugo Fair
13th Aug 2021 15:03

+1
... especially as the CJRS claim was categorically wrong (based on OP info).
A claim should have been allowed (subject to all the eligibility criteria) based on a calculation where the starting point was the salary already in place (not a new suddenly invented one) ... before of course moving on to working out 80% and so on.

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My photo
By Matrix
13th Aug 2021 14:46

3. Client made the furlough claims with no regard to the payslips you presumably sent or paying for your expertise to do it properly. So get them to call the helpline and work out how to repay it.

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By Paul Crowley
15th Aug 2021 11:49

1 is wrong
I would suggest the Matrix answer
Once call made client has discovered the error and advised
Difficult for HMRC to then 'discover' and look for penalties
let HMRC decide the repayment timing

Thanks (1)
Replying to Paul Crowley:
RLI
By lionofludesch
15th Aug 2021 11:57

Paul Crowley wrote:

1 is wrong

1 is almost certainly wrong because the furlough figure should've been based on pre-Covid rate of pay.

It's not stated but the implication is that salary was changed at some time during the pandemic.

Happy to review that observation if clearer details are forthcoming.

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Replying to lionofludesch:
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By Paul Crowley
15th Aug 2021 16:16

Agree
Feb or March 2020 is the reference period
Based on RTI not random bank payments

Which cannot be correct unless NI was considered and paid
There is EENIC on £900

Thanks (1)
Replying to Paul Crowley:
By SteveHa
18th Aug 2021 15:18

I agree with Paul (i.e. Matrix' solution), and I'd be advising them to call the helpline ASAP to avoid HMRC coming to them and calling it "prompted".

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By AGreen84
16th Aug 2021 09:41

If they are still furloughing, why not use the overclaim option on the furlough claim page?

Other than that, yes hands up to HMRC that the claim was incorrect and could they pay it back.

Thanks (2)
Replying to AGreen84:
RLI
By lionofludesch
16th Aug 2021 09:53

AGreen84 wrote:

If they are still furloughing, why not use the overclaim option on the furlough claim page?

That's the one.

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Replying to AGreen84:
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By lh3f9764bg1g
16th Aug 2021 10:22

I wonder whether one could select the overclaimed option if nothing is actually being claimed (for Furlough) in the next month.
The overclaimed option would be a great way of dealing with this and there's a couple of opportunities left to do it.

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Replying to lh3f9764bg1g:
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By DKB-Sheffield
16th Aug 2021 10:29

Hi,

I'm certain this is possible because you are actually submitting a claim - albeit a negative one.

May be worth trying that option first before spending 60 minutes waiting in a queue - only to then have to speak to someone who possibly won't know how to handle it anyway!

Thanks (1)
Replying to lh3f9764bg1g:
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By Janski
16th Aug 2021 11:18

Don't think an overall negative claim would work. One thing for HMRC to pay a smaller claim, but to recover money from a bank account they would need a d/d set up which will not be the case.

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Replying to lh3f9764bg1g:
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By Paul Crowley
18th Aug 2021 13:33

No Does not work
At least 1p must be claimed
Nothing to set off if no claim being made

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Replying to Paul Crowley:
RLI
By lionofludesch
18th Aug 2021 13:55

Paul Crowley wrote:

No Does not work
At least 1p must be claimed
Nothing to set off if no claim being made

Can't you claim a penny then add it to your overclaim ?

Thanks (0)
Kitten
By Hazel Accounts
16th Aug 2021 10:20

How much did they claim as furlough?

If 80% x £900 = £720 then HMRC probably won't pick up as it's less than the RTI filed. There was no obligation to pay the staff more than the 80% - employers discretion whether to top up.
Obviously you still have the problem of what the extra bit to make up to £900 was for - would have to be directors loan account which may cause other issues?

If it was supposed to be 80% of £732 then there is an issue - what was the salary (per RTI) for the reference period.

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By geoffmw1
16th Aug 2021 11:29

you can only use option 1

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Replying to geoffmw1:
RLI
By lionofludesch
16th Aug 2021 11:39

geoffmw1 wrote:

you can only use option 1

The incorrect one ?

How do you work that out ?

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By geoffmw1
16th Aug 2021 11:29

you can only use option 1

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Replying to geoffmw1:
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By Hugo Fair
16th Aug 2021 13:20

Ah, I didn't see the bit where OP said client was in possession of a time-machine.

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Replying to Hugo Fair:
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By lh3f9764bg1g
17th Aug 2021 13:54

I'm just wondering . . . . Tardis? Or HG Wells version?

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Replying to lh3f9764bg1g:
By SteveHa
18th Aug 2021 16:47

H G Wells lost his. The Time Traveller went somewhere in it, and no-one knows where.

Thanks (1)
Replying to SteveHa:
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By Hugo Fair
18th Aug 2021 16:58

... or when.
Which takes us back to the OP's problem!

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By lh3f9764bg1g
19th Aug 2021 14:25

HG Wells would probably have claimed £100 . . . . . then in the overclaim box put in the amount overclaimed **PLUS** the £100 incorrectly claimed in this claim.

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