Furlough scheme comes to a full stop

The Covid-19 Job Retention Scheme - widely known as the furlough scheme – was one of the Government’s flagship support schemes, introduced very early on in the pandemic and credited with supporting an estimated 11.6 million jobs (at no small cost of £70bn).

The scheme, which was designed to support Covid-19-affected employers by allowing employees to be placed on a leave of absence, was adapted and extended several times as the pandemic progressed. The scheme available from 1 July 2021 provided for Government to cover 80% of employee wages up to a maximum of £2,500, with the contributions gradually tapered up to the scheme’s close on 30 September 2021. 

What’s next?

With reports of large-scale fraud in relation to the various Government support schemes – estimated at some £3.9bn in relation to the furlough scheme alone - HMRC have already formed a dedicated ‘Taskforce’ with wide-ranging powers to investigate and recover any funds paid for any improper purpose.

With the option of furlough no longer available (yet with many business still being adversely affected by the pandemic), some employers will find themselves in the difficult position of being unable to pay wages of all their staff and difficult decisions may have to be made – both as regards its workforce and potentially even the viability of the business itself. Businesses that had remained reliant on the scheme will be reviewing their finances.

As to potential scrutiny from HMRC directors should be aware they can be held jointly and severally liable for any sums repayable under the scheme and could also face allegations of breaching their duties (giving rise to personal liability) as well as potential director disqualification. In anticipation of any queries from HMRC, detailed records of payments and decisions taken by directors should be kept and reviews undertaken to ensure full compliance with the scheme, repaying any overpayments (inadvertent or otherwise) to HMRC as soon as possible.

Directors will need to be particularly mindful of their duties and may want to seek advice from legal and other business support professionals when planning for the smooth navigation of the business and its workforce and when reviewing their compliance with the various government schemes – our Employment and Restructuring & Insolvency teams would be pleased to help.

For further information on this update, please contact a member of our Restructuring & Insolvency Team or visit our dedicated CIGA & beyond hub.