In August, HMRC issued the first wave of compliance letters regarding the Coronavirus Job Retention Scheme (CJRS) after moving into the post-transaction review phase of the scheme.

The review will focus on the activity of those who may have taken advantage of the scheme by claiming more than they are entitled to and those who have made fraudulent claims, for example by including employees in their claim who are not eligible.

HMRC believes between 5% and 10% of CJRS grants contain mistakes or have been illegally claimed (ie fraud). HMRC’s Jim Harra, speaking to the Public Accounts Committee, estimated the value of CJRS fraud or error to be £1.75bn to £3.5bn, but that assumes that every error has made an entire CJRS claim completely incorrect.

HMRC said it will focus on fraudulent claims and not on cases where the employer has made an innocent error. It has identified 27,000 CJRS claims where something looks wrong, and it is initially enquiring into 11,000 of those claims.

The compliance letter gives recipients a chance to review their claim and contact HMRC if a mistake has been made. The employer will not be penalised for the error in their claim if the overpaid value of the CJRS grant is voluntarily repaid within 90 days of receipt of the grant or by 20 October 2020, whichever is later.

Schedule 16, Finance Act 2020 allows HMRC to recover amounts equivalent to CJRS payments to which the recipient was not, or is no longer, entitled by imposing a tax charge equivalent to 100% of any payment to which its recipient was not entitled. The charge applies, regardless of whether any overpayment arose from innocent, careless or deliberate behaviour.

The CJRS is a support measure introduced by the government, designed to protect jobs in response to the economic impact of the pandemic. The support is open to all UK companies, including public sector and charitable sector employers. It is estimated £30.8 billion have so far been claimed through CJRS.