It seems like employers’ happy days are over with Rishi Sunak’s latest announcement.
When job retention and business loan support schemes were first announced, owners and employers have been able to let out a long, deep sigh — not because of disappointment but because of relief. With the Coronavirus making its presence painstakingly known with each positive case the UK records, a fourth of UK-based businesses were forced to close down and cease operations last March of 2020.
Among the many worries of employers was managing employees’ salaries while their respective businesses were out of commission. To remedy the situation, the UK government decided to launch job retention and business loan schemes to help support the livelihoods of many people during the Coronavirus lockdown period. They even decided to ease up on requirements and launched less stringent programs for businesses that need fast and reliable support.
Unfortunately, despite the efforts put into job retention, there are still employers who chose to abuse the programs provided by the government, especially the Job Retention Scheme (JRS).
When an employee is furloughed, he or she is mandatorily asked to take a leave of absence from work without pay. Normally, this happens when the company or employer cannot afford to pay the employee’s daily wages due to unprecedented circumstances. Furloughs are often temporary, and employees are called back eventually when the situation in the workplace or the state of the business gets better.
However, due to the wide-scale impact of the Coronavirus, a massive number of workers were in danger of losing their jobs. With businesses closing down and thus, not receiving any revenue at all, they are pressed to consider retrenchment or laying off employees to cut down on operational expenses. A great spike in unemployment rates can cause the UK economy to dwindle further, and lose all hope of the economy “bouncing back” in just a few years after all of this is over.
In order to maintain the status quo, the UK government launched the JRS to stave off threats of massive retrenchment in private companies. Furloughed employees are to receive 80% of their usual monthly wages (capped at £2,500) with the understanding that they are not allowed to render any type of work for the company they work for. This includes even the simplest tasks, such as sending emails to clients or picking up client calls. They must refrain from doing any productive work during the time they are furloughed.
As you may have already guessed, some companies have failed to comply with such terms and are suspected of having let their employees work whilst on furlough.
The UK government suspects that many companies, some of which are even established and recognised ones, have not kept their end of the bargain and allowed/requested furloughed employees to perform work-related duties and responsibilities — either at home or in the office. This is a blatant disregard for furloughing regulations and is considered to be “abusive use” of the support payments. Allowing employees to work after they’ve already received furlough payments is not allowed under this scheme.
After investigating the situation thoroughly, Rishi Sunak has decided to grant Her Majesty’s Revenue & Customs (HMRC) draconian powers which means that they are authorised to go after companies who have violated the rules of JRS in any way. This includes companies that misused or unfairly claimed the furlough support payments. Employers who are found to be guilty of abusing the JRS will be imposed with 100% tax rates for the said payments.
The UK government is beginning to work more aggressively and vows to reclaim the (possibly) hundreds of millions in support payments given to undeserving companies. Even those who have unnecessarily applied for the Self-Employment Income Support Scheme (SEISS) when they’re not in any way suffering from the effects of the global pandemic, will be investigated by the HMRC.
Aside from the 100% tax rates, companies and individuals who are found to have violated the grants and schemes provided by the government and used it for wrongful purposes may face criminal prosecution should they refuse to pay back whatever amount they claimed, plus tax rates.
The said tough powers would be enacted as a law mid next month. The Finance Bill, which includes these powers for HMRC to go after grant violators, is currently in Parliament and is expected to receive Royal Assent mid-July. Companies are sternly warned that investigations done by the HMRC will be thorough and unsparing.
The companies under suspicion of such misdemeanour must be able to present valid and sufficient evidence that they did not violate any rule. Furthermore, employers must show proof that the employees they’ve put on furlough would’ve still been hired if it weren’t for the Coronavirus. Failure to hand the furlough payments to employees will also be considered a grave offence by the HMRC.
So far, roughly £20 billion has been spent by the government to support furloughed employees and self-employed individuals who are affected by the extended lockdown period. This sum has supported the needs of over 9 million workers and 3 million self-employed traders. To think that a big portion of this money was misused instead of extended to people who need them most, one can’t help but empathise with the government’s decision to seek the violators out.
How about you? Were you able to receive support payments from any of these schemes? What’s your take on the HMRC receiving draconian powers to investigate JRS and SEISS violators?
If you have any questions, or simply want to share your insights on this topic, you can hop on my next LIVE of Uncover Wealth Radio, a weekly podcast that aims to bring you the latest news on UK businesses. Follow us on social media to keep yourself up-to-date, and do drop us a hello whenever you’re around!
For more information about this matter, be sure to check out Episode 158 of Uncover Wealth Radio. If you’ve missed the LIVE broadcast, you can always revisit the episode here on our website, Annette & Co.