CJRS: New guidance for offsetting errorsby
Nearly two weeks after coronavirus job retention scheme (CJRS) closed, HMRC has answered questions about how to off-set under and over-claims made in error for earlier periods.
Back in February 2021 I was asked an apparently simple question on AccountingWEB’s Tax Talk webinar about offsetting errors on CJRS claims. It turned out not to be simple at all - and has required HMRC to issue further guidance on the matter.
The questioner wanted to know what an employer or their agent should do when reviewing CJRS claims if they find errors which result in both under and over-claims - could they offset one against the other so that the employer only had to repay any net over-claim to HMRC? The answer it turns out is ‘yes’, but only if the compensating errors arise in the same claim period.
The uncertainty arose because, since 1 November 2020, the CJRS rules have provided for different time limits for dealing with under and over-claims. Where an employer finds that they have under-claimed (ie not claimed all that they were entitled to under the CJRS rules), they must submit an amendment with 28 days from the end of the month of the claim if they want to recover the shortfall. If they miss this deadline, unless they have a reasonable excuse, they will lose out.
Over claim deadline
However, for over-claims, where too much has been claimed, there is no equivalent cut-off point for making corrections. Whenever an over-claim is found, it must be dealt with under FA 2020, Sch 16 - which requires the employer to notify HMRC and then repay the amount owing before various deadlines to avoid a penalty.
Under and over claims
The question then arose, what if an employer reviews their claims and finds that they have made both an under-claim and an over-claim in a given claim period?
For example, an employer who reviews their August 2021 claim in October may find that they have:
- Missed some hours off their claim for three employees resulting in an under-claim of £500.
- Used the wrong reference salary for two other employees and over-claimed £600.
Since they are now past the 28-day window to make amendments for the under-claim, do they have to repay £600 as the total of the over-claims, or can they offset the £500 under-claim and repay the remaining £100 instead?
To some extent, it depends on what the definition of ‘a claim’ might be. I admit that I had assumed that ‘a claim’ was the sum of all the amounts claimed in respect of employees on furlough in any given claim period. This is in line with how the guidance reads and reading it this way would allow an off-set.
In correspondence with HMRC, officers highlighted the wording of the Treasury Direction which underpins the whole scheme. This states that ‘A CJRS claim may be made by a qualifying employer in respect of an employee who is a flexibly-furloughed employee in a CJRS claim period” – ie the claim is at the employee level and what an employer submits for a claim period is not a single claim but the sum of a number of individual claims for different employees.
While this might not be how many employers/agents, particularly those with under 100 employees, will have experienced the claim process, it’s difficult to argue with this position – and it is a helpful interpretation in many contexts as it suggests that errors arising on a single employee, shouldn’t necessarily invalidate an entire claim in a given period.
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Helen Thornley has a focus on personal and capital taxes. Initially training as an accountant before moving to tax, she worked in practice until her appointment as a technical officer in 2017. She also has an interest in the history of tax.