The taxman could claw back up to 10 per cent of all furlough cash from small businesses unaware they have overclaimed.
HMRC and the National Audit Office estimate between 5 per cent and 10 per cent of the total furlough money claimed could represent overclaims.
The Government is due to have spent over £70bn on furlough once the scheme ends on 30 September, nearly double the total UK defence spend in 2019/19.
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At its peak 8.9m people were on furlough; the latest figure is 1.9m.
Nigel Morris, employment tax director at MHA, says innocent errors and incorrect claims will be pursued for many years by HMRC. He advises small businesses check their claims in detail, now that furlough is winding down. They should repay any overclaims through the Government’s own website before HMRC hits them with interest and penalties.
The most common administrative slip-up made by companies has been forgetting to work out claims for flexible furlough on calendar days (365 per annum) and have instead used working days (260 per annum), which they might use for the rest of the payroll, MHA said.
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Small business owners should also ensure that their auditors, bankers and investors are aware of any potential clawbacks. If the clawbacks are not budgeted for companies could end up in breach of borrowing and covenant requirements when they are called on to pay HMRC off.
Morris said: “The furlough scheme was a great success in preventing mass redundancies until the economy rebounded. Yet the scheme was complex from the start and kept getting more complicated with various amendments and extensions made by the Government. Administrative challenges were usually overcome but at a high cost to many employers.
“The advice to all businesses, as the scheme ends, must be to review all their furlough claims and ensure that if they have over-claimed, they make arrangements to pay HMRC back as soon as possible.
“Furlough was a blessing at the time: you don’t want it turning into a major administrative and financial nightmare down the line.”
Further reading on furlough
How to deal with a furloughed employee who refuses to return to work