Coronavirus Job Retention Scheme: It aint over til it’s over
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
18 October 2021
Justine Riccomini confirms the position on HMRC’s interpretation of a Coronavirus Job Retention Scheme (CJRS) claim and offsetting underpayments against overpayments.
In the spring of 2021, HMRC set up a CJRS Forum which comprises around 80 stakeholder participants who have expertise in CJRS legislation, policy and claims. The meetings take place once a month, with ad hoc additional meetings when necessary to deal with any emergent issues.
You may wonder why the CJRS Forum was not set up until spring 2021. No sensible answer is available – but essentially the tax and payroll policy experts from all around the UK were involved in an informal forum throughout March 2020 to May 2021 with dialogue taking place on a near-daily basis to facilitate the creation of the CJRS scheme, review the legislation and manage the claiming portal and comms etc.
From the date of the first meeting of the CJRS Forum in May 2021, there have been discussions around what would happen at the end of the scheme, i.e. would the Job Support Scheme (JSS) and Job Retention Bonus (JRB) be resurrected, or be scrapped?
JSS and JRB scrapped
The extension of the CJRS scheme to the end of September 2021 effectively sounded the death knell for both the JSS and JRB, because the government consider that the extension to the CJRS scheme is generous enough and does not warrant further assistance, especially now that the vaccination programme is almost complete.
ICAS notes that there has been confusion over this amongst employers and agents, but without any publication of a government policy statement it has not been possible to publish guidance on this issue until now.
Meanings and interpretations
Another main topic of discussion at the CJRS Forum has been the subject of offsetting overclaims and underclaims against each other for any particular claim – which then led on to discussions around the definition of a claim. HMRC’s original conclusion was that a claim was per employee, not per pay period, which could have had widespread implications for employers as well as for auditors preparing statutory accounts and corporate finance professionals handling due diligence exercises for M&A transactions.
Following a letter sent by a collective of professional bodies (PBs) to HM Treasury and HMRC to formally dispute HMRC’s interpretation of the definition of a claim and the position on under and overclaims, HMRC changed their stance on the definition of a claim and published guidance to agree with the stance taken by the PBs on 11 October 2021.
What is a “CJRS claim”?
HMRC’s published guidance states:
When working out the amount you’ve overclaimed for in a claim period, you can include all employees in that single claim period.
This means if you’ve overclaimed for one employee, you can offset this by an amount, equal to any amounts that you’ve underclaimed for another employee included in the same claim period. You cannot offset an overclaim made in one claim period against an underclaim from another claim period.
Where you have underclaimed for any employee, you must make that value good to the employee. This is because it is a requirement of the Coronavirus Job Retention Scheme that the employee receives a minimum of 80% of reference pay.
You must repay any balancing overclaim after offsets for any period to HMRC.
Example of offsetting an amount you’ve overclaimed
A Ltd claimed £4,000 for 1 June 2021 to 30 June 2021. This comprised of £2,000 for Employee 1 and £2,000 for Employee 2.
A Ltd reviewed the claim after the amendment deadline and identified that Employee 1 should have received £2,500 and Employee 2 should have received £1,500.
The £500 overclaim for Employee 1 can be offset against the £500 underclaim for Employee 2. This means A Ltd does not have an overclaim for the period from 1 June 2021 to 30 June 2021 as long as they pay Employee 1 the additional £500 they should have received in respect of that period.
Conclusion
It is certainly a relief that HMRC has changed its interpretation; but care still needs to be taken by employers to ensure that their claims are correct – because a compliance review programme is underway in respect of CJRS.
If you wish to contribute to the debate, why not write to us at tax@icas.com or start a conversation on CA Connect?