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Draft legislation on clawback of payments under the Coronavirus Job Retention Scheme
Since the introduction of the Coronavirus Job Retention Scheme (the Scheme), it has been made clear in the guidance that HMRC will retain powers to claw back monies paid under the Scheme retrospectively if it transpires that they have been paid as a result of non-compliant or, worse, fraudulent claims.
At the end of May 2020, the Government published draft legislation which is currently subject to a technical consultation. The consultation runs until 12 June 2020 and the legislation will take effect from the date that the Finance Bill 2020 receives Royal Assent.
The legislation will apply to individuals, businesses, individual members of a partnership and employers who receive or apply for payments under the Scheme, as well as other Government initiatives such as the Small Business Grant Fund.
Draft plans
In summary, the draft legislation provides that, where a recipient is not entitled to a grant under the Scheme, or has misused it by, for example, not paying the monies to the employees for whom claims were made, the grant received will be subject to income tax at 100%. Essentially, this will mean that the full amount of the grant will be repayable.
It is clear from the draft legislation that it is possible for the clawback provisions to apply not only to intentional, fraudulent misuse of the Scheme, but also to those situations in which genuine errors have been made by applicants. Whilst this has always been intimated by the Government guidance on the Scheme, it appears as if this will be enshrined in law. One such example of a potential clawback will be where an employee has ceased to be entitled to monies under the Scheme, but their employer has continued to claim.
Key Points
Given that the legislation is still subject to consultation, there may well be changes before we see it in its final form. However, as it stands, the key points are as follows:
- HMRC will be able to investigate any claim within four years after the grant was made, with this time period being extended to six years in respect of careless behaviour, and twenty years for deliberate misuse of the Scheme.
- Employers are required to notify HMRC if they have received payment under the Scheme to which they were knowingly not entitled. There will be penalties for failure to notify HMRC in such situations.
- If, at the time HMRC orders repayment, an employer is insolvent, then directors may be personally liable if they were responsible for the management of the company, and they knew at the time the liability to pay HMRC crystallised, that the company was not entitled to the grant.
- HMRC has the ability to prosecute in situations where claims under the Scheme have been deliberately fraudulent. This is likely to be the case where, for example, employees have been required by their employer to work during furlough, in express contravention of the Scheme rules.
It would seem unfair, and much less likely, for HMRC to utilise the legislation to seek repayment where employers have made claims in good faith, and based on an interpretation of the Government guidance and Treasury Direction which is often woolly at best. However, some commentators have highlighted the more political and economic point that, after the enormous pay-outs which have been made by the Government under its various schemes, it will have an urgent need to raise funds over the next few years. It remains to be seen whether this will result in a more aggressive review of claims made under the Scheme.
A couple of household names have, in the past few weeks, indicated their intention to return monies received under the Scheme, given that their businesses have weathered the storm more favourably than anticipated originally. Although there is no indication that this will be a requirement in the forthcoming months and, in our opinion, it is highly unlikely to be so, we will watch this closely.
For the time being, and as we have been advising our clients and contacts from the outset, a comprehensive paper trail, which includes details of furloughed employees; the corresponding written agreements; the claims made under the Scheme; and wider detail regarding the company’s finances and the impact of the Scheme on stabilising its position; will all be important tools in demonstrating proper use of the Scheme in the months to come.
Working from home: preparing for the long term
Despite the staged reopening of retail, and possibly leisure and tourism, in the coming weeks and months, it is likely that office-based employees, who can carry out their jobs from home, will continue to do so for a long while yet.
Prior to the pandemic, working from home was seen as an attractive proposition by many employees. For a large number of people, this has proven to be the case, and many employers have seen an increase in productivity since the beginning of lockdown. However, the reality of homeworking has brought with it, for others, significant isolation and, rather than an increased ability to balance home and work life, the blurring of the boundaries and the seepage of work further into the evenings and weekends. This will have inevitable consequences on both employees’ mental health and their quality of work, and it will be important to address these issues in order to ensure that homeworking works as effectively as possible in the medium to long term.
We set out a checklist, below, which provides some ideas to help.
þWorking from home policy
Until recently, employers’ working from home policies were likely to be geared towards occasional agile working. Permanent working from home has now been commonplace for almost three months and is likely to continue for several months yet. Ultimately, this crisis is likely to result in more widespread, regular working from home, whether to save on premises costs, or in response to a call from employees to work more flexibly in the long term.
In the light of the above, now is the time to consider an overhaul of your working from home policy, both in terms of the practicalities (such as team communication), as well as the health & safety aspects (such as desk assessments). The other suggestions, below, could also be incorporated into the policy. We have significant experience in advising on working from home policies, so please do get in touch if you would like further information.
Health & safety risk assessments
Employers are under a duty to protect their employees’ health, safety and welfare. This is the case even where employees are working from home.
Your usual risk assessments should be updated in order to deal with the homeworking aspect. As a result, it may be that you will need to provide some online training to employees to ensure that they are working safely. It may also be wise to provide employees with an online desk assessment questionnaire which they can complete and return electronically.
Technology / equipment
At the beginning of the pandemic, sending employees home with a laptop and not much else would have been likely to be justifiable. However, the longer that home working continues, the greater the obligation on the employer to provide the appropriate equipment to carry out their role safely and efficiently. This is closely linked with the need to conduct a risk assessment, above. Whilst employers will need to balance the need to invest in equipment with the probability that at least a partial return to office working will be likely in the future. However, this does not negate an employer’s fundamental duty to ensure that employees have a safe system of work.
Daily interaction between managers and their teams
Working for days on end without contact from colleagues can be very isolating, and increase levels of anxiety. A daily catch-up call/video session with the whole team can help to keep employees feeling valued and engaged. On the flip side, some employees might find daily calls rather overwhelming – “Zoom fatigue” is definitely an ailment of the COVID-19 era. As a result, you may want to make these calls optional; a “drop-in” session where employees can join to have some contact with their colleagues if they wish. Save important announcements for those meetings which are mandatory.
Mentoring system
Particularly in the current situation, where tensions are especially high, many employees would benefit from a more pastoral contact, outside of their immediate team, to whom they can talk confidentially.
Promotion of separation between work and home life
The past couple of months have exacerbated the extended working culture – in many cases, employees are working harder than ever before, despite not having lengthy commutes which take up hours of their day. The proximity of their workspace to their home life is making it all the more difficult to switch off.
Whilst such a working pattern may have been sustainable in the short-term, a lengthier stint may weaken employees’ mental health and worsen productivity. Encourage employees to take plenty of breaks throughout the day, and finish work at a similar time, and in the same manner as they would do in the office.
Working from home: tax relief for home office equipment
During May 2020, the Treasury announced a temporary income tax and National Insurance contributions exemption in relation to the reimbursement for office equipment to enable home working. Whilst there has always been no income tax liability for those purchases made by employers in respect of equipment provided to employees for the performance of their duties (subject to certain criteria being met), a further exemption has now been introduced in relation to home working office equipment purchased by the employee and reimbursed by the employer.
In order to take advantage of this provision, the equipment must be obtained for the sole purpose of enabling the employee to work from home as a result of the Coronavirus (COVID-19), and the provision of equipment would have been exempt if it had been provided to the employee directly by the employer. The exemption is relevant to equipment reimbursed from 16 March 2020 and is in force until the end of the tax year 2020-2021.
Statutory Sick Pay for Test & Trace
An extension has been made to those categories of individuals entitled to Statutory Sick Pay (‘SSP’) under The Statutory Sick Pay (General) (Coronavirus Amendment) (No 4) Regulations 2020. Workers who have been told to isolate under the new ‘Test & Trace’ system will now be entitled to SSP for the requisite 14-day isolation period.
[CONTENT CORRECT AS AT 8 JUNE 2020]
If you would like to discuss any of the issues raised in this article or have other concerns about the impact of Coronavirus, please contact Rachael Lloyd, James Baker, or Andrew Tobey in Michelmores’ Employment team.
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This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing.
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