Do You Owe HMRC Furlough Repayments?

Who owes HMRC reimbursements?

HMRC has recently warned over 1200 companies, who owed more than nine months of back payments, that the unpaid employment taxes they racked up throughout the pandemic must be reimbursed.

How could this affect me?

Businesses will not be able to claim furlough cash in the future unless they repay this backlog of income taxes and national insurance payments. The furlough scheme requires companies to pay these in order to make claims.

HMRC has confirmed that other debts do not impact a company’s ability to access this financial support.

In the letter that HMRC sent out, they state that these reimbursements are considered part of the grant that should be returned, and not an additional cost.

What if I can’t afford to pay it back?

Whilst providing immediate help to those who needed it was the priority when the pandemic started, this has now shifted over time and HMRC now need to ensure employers are paying the correct taxes and contributions that they agreed to when applying for the grant. They stated it is vital that the tax system continues to function and supports essential services such as the NHS at this time.

The majority of employers have paid what they owed, but officials will be understanding of those who are struggling with Covid-related debts and are allowing payment plans to be set up in order to make further claims.

What is happening now with the Furlough scheme?

As businesses have reopened between the end of February and May, half of the people who were claiming have been moved off of the furlough scheme. As of the 31st May, only 2.4 million people remain furlough or flexi-furloughed. This is down from a peak of nearly 9 million at the peak of the pandemic last year in May!

From the start of July, employers had to start covering 10% of furloughed wages. The scheme began to taper off from this date and is expected to continue falling as the subsidy falls to 60% from August.

Businesses will still have to pay National insurance and pension contributions on the subsidy, plus the normal pay for any hours that are worked during furlough.

Will the scheme definitely end in September?

Our retail, leisure & hospitality industries have expressed their strong need for the scheme to continue past September in order to continue supporting the recovery of many businesses.

Some of the highest rates of furloughed employees can be found in these industries, with 57% of all jobs in passenger air transport being furloughed, and similar numbers seen across the other sectors.

Whilst restrictions have recently been lifted, many are still struggling with the burden of the last year and a half. Over 1 in 4 older workers who were furloughed still remain so during the ‘reopening of the economy’ and some worry there will be higher risks of unemployment as the scheme tapers off.

The government will continue to monitor the situation and we will report on any further news or updates on the scheme as we near its supposed end.

You can read more about what has and will be changing with the furlough scheme in our recent blog post here.

Is there any other funding available?

If you’ve been forced to work from home during the pandemic, you may be able to claim tax relief for the additional household costs you’re facing.

If you’re self-employed or a member of a partnership and have been impacted by Covid-19 you might be able to claim a grant from the Self-Employment Income Support Scheme (SEISS).