Coronavirus Job Retention Scheme (CJRS) – responsibilities and pitfalls

All of our advice is based on the evolving Government guidance made available to date and is subject to change pending further revised guidance or any legislative update.

As the CJRS enters its second phase from 1st July 2020, it is an appropriate juncture to reiterate the importance of retaining, as well as scrutinising, information relevant to the CJRS claim process. Our clients will be acutely aware of the significant technical, administrative as well as processing requirements of the CJRS. Whilst it has been a most welcome initiative there is an increasingly palpable sense of inevitability, as far as scrutiny by HM Revenue & Customs (HMRC) is concerned. As mentioned in our newsletter on the draft legislation relating to the taxation of the CJRS as well as other support payments (see here) there have been increasing reports of misuse of such schemes.  Indeed, the likelihood of fraudulent claims is by all accounts an expectation judging by comments made by those such as Jim Harra (HMRC First Secretary and Chief Executive). Needless to say the need for vigilance is paramount with careful record keeping and due diligence the order of the day to help prepare for what is expected to be a rigorous audit approach by HMRC.

Record keeping requirements

Based on the guidance to date we have summarised  as follows:

Records that must be kept for 5 years:

  • Original furlough agreement (prior to changes from 1st July)
  • Any new furlough agreement, to cover the flexible furlough scheme which can be adopted from 1st July.

Records that must be kept for 6 years:

  • detail as to the amount(s) claimed and the claim period(s) for each employee
  • the claim reference number for each claim
  • calculations for each claim
  • for employees flexibly furloughed, detail regarding usual hours worked
  • for employees flexibly furloughed, actual hours worked

The  above are considered the minimum requirements from a record keeping perspective.  There may well be a host of other associated and relevant documentation that would be useful to retain, insofar as adhering with the scheme guidance is concerned, not to mention the draft legislation referenced in regard the taxation of the CJRS. For instance, as regards calculations, it is advisable to retain a record of the method used to arrive at a  claim and the reasons a particular method was adopted.  We envisage HMRC will focus and scrutinise specific sectors and will take a particular interest in matters such as the reference pay used in relation to the calculation of claims, for instance.

One of the crucial aspects of eligibility for a CJRS payment from the start of the scheme until 1 July 2020 is the requirement that a furloughed individual does not carry out work for their employer. The issue of furloughed individuals being asked to breach this requirement has featured prominently in recent press reports of scheme abuse, and is also therefore likely to be one of the key checks undertaken by HMRC. The difficulty for employers of proving that no work has been undertaken (i.e. proving a negative) underlines the importance of retaining furlough documentation, including written instructions to cease all work. Now is the time to ensure that these records are comprehensive, as HMRC may undertake checks many years down the road and the passage of time will not assist if record keeping is less than adequate now.

Draft Legislation – taxation of payments

Whilst the legislation is in draft form and was published for consultation pending Royal Assent (which is expected toward the end of July) we believe most, if not all, the provisions are likely to be implemented. Notably, any CJRS grant becomes 100% taxable (i.e. repayable in full) if a person is not entitled to it due to

  • a change in circumstances, or
  • because the person has not, within a reasonable period, used the amount to pay the costs to which the payment was intended to reimburse

This raises the possibility of liability arising in a scenario where, say, an advance claim has been submitted for a period of flexible furlough to include an individual who at the time of a claim was expected to work a set number of hours, but in the event works different hours than originally expected.

Further, the  requirement to use the payment within a reasonable period for the purposes that it was intended is vague and leaves the matter open to interpretation and challenge. A specific timeframe has not been defined in the draft legislation and documenting and detailing any reasons as to why there may have been a delay in making payment would certainly help to mitigate risk. In this regard and, in general, attention must also be drawn to the penalty regime that we highlighted in our previous newsletter.

In short, the draft legislation provides for the issue of penalties where HMRC consider a person in receipt of a payment knew that they were not entitled to it. Any penalty is calculated on the basis that the error is ‘deliberate and concealed’. This gives rise to a penalty of between 30% and 100%, with a minimum penalty of 50% if the error is found as a result of an HMRC audit (known as a ‘prompted’ disclosure).


Given the draft legislation and amid widespread reports of ever-increasing calls to their fraud hotlines it is quite clear that HMRC will be taking a strong stance as far as compliance is concerned.  As always, it is vital to keep  relevant records as well as evidence to detail the reasons behind any key decisions you have made. An early review of the quality of your records is certainly a good policy and may well prove invaluable if HMRC commence an audit.

If you would like further information on a review/audit of your CJRS process, please get in touch with us.

Published: 07.06.20 - Posted In: Latest News