Calculation of CJRS grants: disclosure of mistakes to HMRC

The Coronavirus Job Retention Scheme comes to an end at the end of October. Whilst the scheme has been widely welcomed by employers, it is not without its complexities, not least as guidance on the application of the scheme and the calculation of grants has been updated on a frequent basis.

Given the changes in guidance and the complexity of the rules, many employers may have made some technical mistakes in applying for grants under the scheme, particularly given the need to operate at speed.

HMRC have made clear that disclosure of innocent errors should not result in penalties provided the amounts are duly repaid, but that they will impose penalties for overclaims known to be incorrect or in cases where circumstances changed and HMRC should have been notified that the grant was repayable or taxable.

Under the CJRS legislation, HMRC has the power to recover amounts of CJRS grants that have been incorrectly claimed, and if notification was not made of this, there could also be penalties.

These are subject to the normal rules for penalties for failure to notify but where employers are aware of a problem and do not come forward the penalty could be up to 100 per cent.

It will therefore be prudent, in all but very straightforward cases, to review the amounts claimed and to make sure that any problems or errors are identified and can be corrected. Reviewing this and ensuring that any points on which the operation of the rules is unclear have been properly addressed should also help to protect against penalties.

If you have overclaimed a CJRS grant and have not repaid it, you need to tell HMRC this, ideally, within the “notification period”. This ends on (and is the latter of):-

  • 90 days after the relevant grant was received (if this was in excess of the correct amount);
  • 90 days after the date circumstances changed so that you were no longer entitled to the CJRS grant; or
  • on 20 October 2020.

This can be done in the next claim if a further claim is being submitted or otherwise will need to be done separately. If you do not do this you may have to pay a penalty. Once a disclosure has been made to HMRC any overpaid amount will either be assessed directly by HMRC or need to be adjusted for in the tax return for the period. Common problem areas include:

  • the use in the Scheme of calendar days, not working days where the claim is for part of a period;
  • activities are undertaken by an employee while on furlough (particularly if the employee is also a shareholder or in the case of company directors);
  • holiday and bank holiday pay and arrangements;
  • the interplay between family/sick leave and furlough;
  • identifying which elements of pay constituted ‘regular payments’ when calculating how much to claim;
  • “hangover” problems were caused by the fact that until 5 June it wasn’t possible to correct errors for a previous period’s claim in the next claim.

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