Workforce Solutions

Furlough scheme clawback: how to respond to HMRC 'nudge' letters

Published on 22nd Sep 2020

HMRC is now sending out "nudge" letters to employers (including many staffing companies) at the rate of 3,000 a week as part of a campaign to investigate and clawback the estimated £3.5bn overclaimed under the scheme. Responding to these letters without care could cause serious problems.

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HMRC has begun investigating claims and there are a number of issues for businesses to think about. In particular businesses should be considering carefully whether they can satisfy HMRC and (assuming HMRC do not take action before the next annual audit) justify to their auditors that they were sufficiently "severely" affected by Coronavirus to warrant using the scheme. They also need to conduct careful checks to ensure – and be able to demonstrate to HMRC and their auditors – that their workers on furlough did not carry on working in any material way (which is believed to have been relatively widespread at many businesses).

Penalties may apply if funds are not repaid before 20 October 2020 which HMRC subsequently deems were incorrectly claimed.

It's also important for businesses to keep records to justify their claims in case HMRC investigates in the same way it has already threatened to do so in relation to 27,000 "high risk" claims.

Proceed with caution

In these letters HMRC say that it believes that the business may have overclaimed and so should repay the grant. No explanation for this belief is given in the letter. Further, the letter says that even if the business thinks it has correctly claimed, it should nevertheless call HMRC.

If you get one of these nudge letters it is important you take care how you respond. For example, simply assuming everything is OK, and telling HMRC that is the case, risks inadvertently telling HMRC something which turns out not to be true, which could become a serious problem in due course.

There is no doubt that the nudge letters set up risks for staffing companies and other employers. We recommend you review your position before responding and certainly before the expiry of the voluntary repayment period on 20 October 2020.

If you have received a nudge letter and are concerned, please get in touch with one of our experts below or your usual Osborne Clarke contact.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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