Are you a business owner then this podcast Furlough Ends - Business Wrap Up is for you! You'll learn

• What housekeeping exercises are needed
• How to deal with overclaims
• The entries to be made in your tax return, self-employed or CT form.

It's all jargon free so that anyone can understand it.

What is Furloughing

This is effectively employee hibernation. The Corona Virus Job Retention Scheme was the money to support it.

Click here to find out more information Furlough Ends - Business Wrap Up

Conclusion

If you have any questions or concerns after listening to this podcast, please don't hesitate to reach out! We're here for you every step of the way. Let us help make sure that you wrap things properly.  If you want a visual of the entries in your tax return then watch this video

Above all, you need to reflect on Furlough Ends - Business Wrap Up.  This is a must know if you have claimed the Furlough Grant.  You need to put yourself more in control over your business. Listen to find out more. Furthermore, it doesn’t matter what size, shape or form your business is. You need to understand how to wrap up and prepare now the scheme has finished.  My podcast will help.

Listen to find out more, tap into more details at HMRC.

Furthermore, my mission is to inform, inspire and educate you to get closer to your numbers.

You can make more profits, save tax and time, improve your well-being and your money mindset.

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The fellow grant scheme at a cost of 69.3 billion pounds are approximately 90% of the UK education budget provided a lifeline for over 11 million people. Even though the scheme stopped at the end of September 21, last claim being submitted on the 14th of October, there is still work to be done for businesses. In this podcast

I'm going to outline what those housekeeping exercises are, what you need to do if you've discovered you've over-claimed under the scheme, and the entries that you need to make, and the disclosures to be made in your tax return, whether you are self-employed or you are submitting a company tax return.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another episode of I Hate Numbers, the podcast that's there to increase your financial awareness, up your money mindset, help you make more money, save tax and time. What a fantastic combination we have there. Let's crack on with the podcast. As I said at the beginning, the scheme officially stopped at the end of September 21, and the last claim would've been submitted by the 14th of October, 2021.

Despite the large amounts of money paid out, there is still work that's been carried out by HMRC, and also businesses to make sure everything is in order. There's no clawback or undue investigation by HMRC. What I'm going to outline to you, as the housekeeping that needs to be done, to wrap up the furlough scheme from a business's point of view, are things that should have been done at the beginning, but there's still time to put things right if for any reason

you've fallen short over what you need to have done. Now, by businesses in the context of the furlough scheme, the furlough scheme was provided to employers. So, if you are a not-for-profit, a private business, a large PLC, an SME, a freelancer that employs somebody else, then the furlough scheme would've been made available to you.

Fundamentally, what we need to do is do a 360-degree audit of our own business. We need to make sure that we have on file the record for the conversations that we would've had to have with staff where they would've agreed to changes in their employment contracts. Remember, that had to be done by agreement, so in some form of auditory of the letter sent out, the signed agreement

is a must. There should be confirmation from your employees in writing that they have been furloughed, agreed to be furloughed, and agreed to be flexibly furloughed. Flexibly furloughed, by the way, folks, is where you don't work your full hours, you work for some of them and are on furlough for the remainder.

You need to keep a written record of that agreement for at least five years, the number of hours your workers were working, especially when you're claiming flexible furlough, has to be kept on file for at least six years. The methodology, how you went about calculating average pay, regular pay, how you went about submitting the claim, adjustments that you would've had to make, for example, when you're claiming only 60%, 70%, or the full 80%, the times when you would've been able to claim national insurance contributions and pension contributions at the beginning of the scheme,

make sure those are on record, and make sure you got some workings to back them up. Flashbacks to school where your math teacher would've asked you to provide workings. The answers that you provided. So, that's absolutely step number one. Go through, make sure you've got those records. Make sure that if you put on your audit hat on that you could trace back the claim back to the original workings, and also the documentation that you need to have kept on file.

Now, it's likely that mistakes could have been made. It's likely that you may have inadvertently claimed, it may have been likely that you've claimed when you didn't satisfy the four conditions. So, perhaps, maybe your workers were working when they shouldn't have been. Maybe you've overclaimed. Mistakes can happen, and with the propensity and the speed of which furlough claims were made, it's not going to be a great shock if those innocent mistakes are made.

There are some naughty people out there who would've fortunately claimed. That's a story and a topic for another day. HMRC, by the way, folks are investing a huge amount of money and resources, both in staff, time and data gathering to actually follow up and investigate those claims. Some statistics say and suggest

at least 20% of the claims submitted are ones that are going to be clawed back. Now, what do you need to do if you have actually overclaimed? Obviously, you need to make a disclosure to HMRC as soon as possible. Typically, if you make a disclosure within 90 days of the original claim being made, that will mitigate any penalties.

If you find that the claim is a historic one, and you are reviewing it, and you've made a mistake, the key thing is do not do the ostrich impersonation. Hold your hands up, submit the claim of the mistake, and rectify accordingly. That will do a lot to mitigate any penalties and also slow down the interest clock that will be happening.

Now, the last thing to be done is the disclosures that you need to make. If you are self-employed, a freelancer, and you happen to be employing staff, there are disclosures that you need to make in respect of the furlough claim. And also, if you're a company, a corporate body, you'll complete what's called a CT 600, which is the posh name for a corporation tax return.

The disclosures are more comprehensive and they are a special note, especially if you've actually made an error and a claim in respect to the accounting period of your corporation tax return. Now, for the sake of illustration, I'm going to be using the same figures and the illustration that HMRC have published in their guidance notes to the corporation tax return, and let's go through.

Now, if you like the visuals, folks, check the show notes out at the end. I've got a short video I've recorded demonstrating what the return looks like, the entries that need to be made. Again, you can use that visual along with the podcast as well. Now, let's, first of all, consider if you are self-employed, a freelancer, you complete a tax return, and you complete self-employed pages.

Now, if that is your situation and you have claimed furlough grant, then you need to disclose the level of grant that you've made within your tax return. The figure that you put in there goes into box number 10 on the self-employed pages. If you complete what are called short pages, typically, there are two pages in length and they're for businesses who have self-employed turnover below 85,000.

If your turnover is over 85,000, by the way, you must use the four pages and the figure for the furlough grant goes to the box 16. Do not under any other circumstances, by the way, include any other support grant you've received from Coronavirus. 10 and 16 is for the Coronavirus grant, the job retention grant only.

Also, you may have got an eat-out grant. If you are in the hospitality sector, that's also allowed to go into those boxes. In your personal tax return, by the way, whether you do short or long pages, make sure you sign the declaration at the end box 20.1 to say that your tax return includes entries for the Coronavirus report.

If you don't, it will slow things down. HMRC will put that to one side and they are manually investigating lots of returns anyhow, so don't obviously raise a flag when one doesn't need to be. Now, when it comes to the corporation tax return, it's slightly more comprehensive. And for the sake of the remainder of this podcast, I'm going to use the example that HMRC themselves published in their guidance days.

So, let's assume a company, it has what's called an accounting period that runs on a calendar year basis. So, it prepares its accounts between the 1st of January and the 31st of December, 2020, and during that year, under accounting rules, it's included a 135,000 pounds for the job retention grant, which I'm going to call the Furlough grant.

Now, that 135,000 is its entitlement, so that would be the cash it's physically received during that year, plus it's also included in that 15,000 pounds worth of grants that were due for that year, but physically received after the end of the year. Now, when you come to complete the boxes in the corporation tax return, you only refer to the cash that's actually received.

Let's assume that that figure, as we said earlier, is 120,000. Now, the company has overclaimed during the year 5,000 pounds, and what they did, they made an adjustment on their next submission due in 2020, so there's no overpayment. They overclaimed in one month. They adjusted the claim in the following month, and therefore, there's no overpayment in that calendar year that 5,000 does not need to go into the return.

What it subsequently discovers after the end of December ‘20, in February ‘21, they realise they made an overclaim of 10,000 pounds. They made a voluntary disclosure to HMRC and told them about that figure. Going fast forward, as they continue their investigation, they find another error in the September 21 claim, and effectively they realised they have made

error to the tune of 8,000 pounds. They received that sum of money, by the way, in 2020, but for a number of reasons, they didn't actually disclose that figure to HMRC. So, what we need to do now, let's summarise where we are. 120,000 pounds is what's been received in the calendar year. 5,000 pounds was misclaimed in May, but it was adjusted in a future claim.

We can ignore that. In February, 2021, they found they'd overclaimed 10 grand, which they got in 2020. They made a disclosure to HMRC in respect to that sum of money. And in September ‘21, they also discovered another 8,000 pounds they've inadvertently claimed they received it in 2020, but they haven't, as of yet, disclosed that amount.

So, now let's go for the entries into the corporation tax return. Now, I'm going to refer to the box numbers. In box 471, we include the actual cash that's been paid into your bank account for the amount of Coronavirus grant received, and this is the sum of 120,000. Box 472, now, is the figure that you are actually entitled to claim if all things were correct.

Now, if we've taken into account the 120 grand received, we've said of that 18,000 pounds approximately, that was misclaimed in Feb, 8,000 in September is an overclaim. So, the actual entitlement is only 102,000. That goes into Box 472. So, what we have now is 120 cash received in box 471. Box 472 includes the amount that you are actually entitled to if all things were done correctly.

Now, we have two remaining boxes to consider. Box 473, we include the amount, we've retold HMRC about, the voluntary disclosure, and we enter the 10,000 pounds. Now, if we take those figures into account, folks, that means there's an 8,000-pound figure, and that's the figure that HMRC will want to claw back through the mechanism of the corporation tax return.

8,000 pounds, by the way, goes into a box called 526, and that says, by the way, for your Coronavirus claim, we are looking to claw back by the tax return you're submitting, and obviously when you make the payment of 8 grand. Now, added to that, by the way, will be any tax that you owe on your corporation tax profits.

The two together will constitute the money that HMRC will expect from you. So, if you've got profits for that year of let's say 10,000 pounds, the corporation tax will be about 1900 pounds. Let's say that means in total, HMRC will want the corporation tax on your profits plus the overclaim. Now folks, that's in essence what you've got to do.

So, in summary and in essence, imagine you are going to be investigated tomorrow. Make sure you are prepared for that audit. It may not happen, but it may happen. You may get an investigation which is purely innocent. They're not saying you've done anything wrong, but something looks not quite right and there may be a risk flag that's been raised.

Make sure that you can validate the workings that you've submitted. If you have made a misdeclaration, then you need to make sure that you hold your hands up to it as quickly as possible and make the declaration. We've done these for our clients as well, and I've done hundreds of these claims, and therefore, once you embrace it, then it's not as arduous as you would think.

And lastly, make sure you do the disclosures in either your personal tax return or your corporation tax. Folks, I hope you found this podcast useful. Hope you got some value from it. I'd love to hear any of your feedback and comments. If you feel there's somebody out there that could benefit from this podcast, I'd love it if you could share with them.

Subscribe and, folks, have a good time, don't have nightmares, and I'll see you on the other side next week. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.