A 30-day amnesty period is likely to be introduced by the government to allow any firms who may have abused the furlough scheme to pay back the money without fears of penalties.

The Coronavirus Job Retention Scheme has been heavily used during the health crisis by firms to alleviate the financial pressures they found themselves under.

It saw the government pay 80% of monthly wages for staff, up to £2,500, in a bid to prevent widespread job losses.

But a key condition was that staff put on furlough were not able to be asked to do any work during the period. And with little guidance at the start of the scheme, it is feared many may have inadvertently breached the rules.

Now draft legislation is being rushed through parliament to provide HMRC with powers to check furlough claims.

And that will see the introduction of a 30-day amnesty period allowing businesses to repay any money they have received without threat of sanction or penalty.

Andy Wallis, a partner in the corporate tax team at accountants and business advisors Kreston Reeves, which has offices in Canterbury and Chatham, explains: "The uptake of the furlough scheme has been extremely high.

"In May we surveyed 221 small businesses and found that over 60% of them had taken advantage of the government’s furlough scheme. It is now widely believed that up to a third of businesses have in some way stretched the rules surrounding furlough allowing staff to work.

“Whilst the guidance is clear - businesses are not allowed to let staff work whilst on furlough - what happens when staff decide to work in some capacity without their employer’s knowledge, for example helping a customer or advising a colleague isn’t.

“Given the likely high rates of infringements of the furlough rules and the potential difficulty in recovering incorrect claims, the draft legislation will introduce an amnesty allowing businesses to repay money taken through the Coronavirus Job Retention Scheme without any sanction or penalties.

“Those businesses that do not take advantage of such an amnesty and are later found to have stretched the rules may find themselves under serious investigation and facing substantial fines. Businesses should therefore triple check their claims and discuss the amnesty with their advisers if they have any concerns of potential infringements, especially as business owners may well be pursued directly and could even be named and shamed.

“It is vitally important that businesses keep good and clear records of staff on furlough.

"The guidance surrounding the furloughing of staff has been complex and changeable, and in the next few weeks further changes allowing staff to return part-time really does require the employer to keep appropriate records throughout. Copies of communications to all staff, particularly those on furlough, reminding them of the rules is the bare minimum.”

The rules on the furlough scheme will change from July 1, allowing employers to bring back some furloughed staff in a part-time capacity.

And from August 1, employers with staff on furlough will have to pay all National Insurance and pension contributions.

In September, firms will have to pay 10% of wages for staff remaining on furlough and 20% in October.

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