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
- 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.
- 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.