It will come as no surprise to hear that HM Revenue and Customs (HMRC) is making stern efforts to claw back sums paid in error under the COVID-19 furlough scheme. As one case showed, however, that process has left some reputable and entirely honest employers caught between a rock and a hard place.
The case concerned two workers who started employment with a furniture company in late February 2020. Because they were taken on so late in the month, they were not paid for the first time until 26 March 2020, three days after the first lockdown came into force. They were placed on furlough.
HMRC took the view that the company was not entitled to furlough them and demanded that it repay over £20,000 it had received under the furlough scheme. The case was one of the first appeals in relation to the recovery of furlough payments made to employers during the worst days of the pandemic.
Ruling on the company’s challenge to the demand, the First-tier Tribunal (FTT) noted that conditions attached to the furlough scheme were crystal clear. In order for payments made to an employee to qualify under the scheme, their earnings were required to be declared to HMRC via its real-time online platform no later than 19 March 2020. In the case of the two workers, that was not done until 25 March 2020.
Expressing considerable sympathy for the company, the FTT noted that there was no dispute that the workers were taken on prior to lockdown and that they would have qualified under the scheme had they been paid for the first time in February 2020. When the pandemic hit, the company had to close down overnight and, notwithstanding the furlough scheme, it was constrained to make 70 of its staff redundant in order to survive.
The company said that its conduct was in line with the spirit of the furlough scheme and that it would be unfair to exclude it on a technicality. The FTT, however, found that it had no jurisdiction to consider such arguments. Its duty was to adjudicate on the law and the rules governing eligibility for the furlough scheme represented a clear bright line. With HMRC’s consent, the demand was reduced from £22,018 to £20,504. The company’s appeal was otherwise dismissed.