Treasury and HMRC bring MPs up to speed on CJRS and SEISS

20 Nov 2020

The House of Commons Public Accounts Committee held a session with representatives of HMRC and the Treasury on Thursday 12 November 2020 as part of its inquiry into COVID-19 and employment.

The hearing focused on the job support schemes implemented since the start of the pandemic. Witnesses from HMRC at this session were Jim Harra, Chief Executive, and Jo Rowland, Temporary Director General, COVID-19 Response Unit. Witnesses from the Treasury were Beth Russell, Director General for Tax and Welfare, and Sir Tom Scholar, Permanent Secretary. The MPs referred to a recent NAO report ‘Implementing employment support schemes in response to the COVID-19 pandemic’, but the questions and comments covered a much wider area.

Treasury and HMRC bring MPs up to speed on CJRS and SEISS

The House of Commons Public Accounts Committee held a session with representatives of HMRC and the Treasury on Thursday 12 November 2020 as part of its inquiry into COVID-19 and employment. The hearing focused on the job support schemes implemented since the start of the pandemic. Witnesses from HMRC at this session were Jim Harra, Chief Executive, and Jo Rowland, Temporary Director General, COVID-19 Response Unit. Witnesses from the Treasury were Beth Russell, Director General for Tax and Welfare, and Sir Tom Scholar, Permanent Secretary. The MPs referred to a recent NAO report ‘Implementing employment support schemes in response to the COVID-19 pandemic’, but the questions and comments covered a much wider area.


Committee Chair Meg Hillier, Labour, is concerned about how CDS (the Customs Declaration Service) will perform in relation to the Northern Ireland issues. HMRC’s Jim Harra said CDS will be deployed in mid-December. Traders will not have to deal directly with CDS as long as they register for the trader support service, with some 5,500 companies registered so far (out of 12,000 businesses in Northern Ireland that bring in goods from Great Britain (GB) and need to register). Harra said full import controls are being staged in, in the case of GB-EU movements. And in the case of the Northern Ireland protocol, the key step is the free trader support service.


Harra told Hillier that HMRC have no firm estimate of furlough fraud but assume between five per cent and 10 per cent. HMRC have recovered £382 million under the Coronavirus Job Retention Scheme (CJRS), largely from people voluntarily correcting their claim or reacting to a prompt from HMRC. Harra expects that HMRC will end up investigating about 10,000 cases.

The Treasury’s Sir Tom Scholar explained to Labour’s Nick Smith how the Treasury was able to act so quickly.  This was partly because the Treasury had done some contingency planning and initial policy work on what a job support scheme would look like and the possible ways of implementing it, and the Treasury has a close working relationship with HMRC. Harra pointed to three key investments by HMRC in recent years that helped: investing in technology that enabled HMRC staff to be very flexible; investing in a digital tax management platform; and, six or so years ago, HMRC invested in moving PAYE on to real-time information.

Lack of pandemic contingency planning

Sir Tom Scholar said he finds it very hard to see how CJRS could have been done materially more quickly unless the UK had had, as Germany has had for more than 100 years, a wage support scheme that was completely integrated into the welfare system. Sir Tom implicitly criticised the postponement of Making Tax Digital, claiming it would have meant that there was ‘much more information in the system that would have helped with the self-employed’. On contingency planning, Jim Harra said the costs of maintaining ‘flat-packed applications’, to keep them ‘live’ with other infrastructure changes, would be quite prohibitive.

Extension of CJRS and SEISS

Nick Smith asked about costs of the extensions to CJRS and SEISS into 2021. Sir Tom said the official estimate will be published by the OBR in two weeks’ time. The Treasury’s Beth Russell does not expect the cost to be as high as the £40 billion (between now and March) suggested by Smith, considering the differences between the restrictions in the spring and the restrictions that we now expect for the next few months.

Lessons learned from lockdown 1.0

Sir Tom gave examples of how Treasury learned quickly, for example, in the spring, the changes to the treatment of people on parental leave and ex-servicemen and women. There was also the introduction of the ability for people on furlough to work part time. And in the summer and into the autumn the Treasury developed the job support scheme. Harra noted that as HMRC opened the new claims service, they saw a very low level of contact on day one, which indicated that employers knew what they were doing. HMRC have tweaked their guidance and are looking at making the CJRS more transparent for the public so employees know more about what their employer is claiming in relation to them (it may have a ‘small positive effect’ on HMRC’s ability to manage error and fraud). The reason that SEISS took longer to launch than CJRS was because HMRC have not really reformed their data architecture or ‘technology architecture’ since the late 1990s; that meant we had a fair bit of data cleansing to do before HMRC could launch the self-employed scheme, said Harra.

Value for money?

Dame Cheryl Gillan, Conservative, asked if the Treasury considered the value for money of the employment schemes. Sir Tom replied that normal costings were not done for CJRS because it was not a marginal change in policy but rather a major structural change in response to a paradigm shift in the economy. We had no idea how long the pandemic would last either, he said. He added: “It was an expensive scheme, but the judgment was that the cost of not introducing it would ultimately be higher, even if that was basically unquantifiable.” When quizzed on the impact of record redundancies between July and September, Sir Tom said Treasury data from August shows that of those people on furlough from April to July who then came off furlough, the very great majority, around 90 per cent, remained in their previous job.

HMRC staffing

Jim Harra explained that HMRC had to redeploy compliance staff in two ways: first, to supplement the service staff on the helplines initially; and secondly, to manage the compliance risks in these schemes. That will have had an opportunity cost on the compliance yield that HMRC can collect this year and potentially going forward, he said. Harra went on to say HMRC temporarily suspended some of their compliance activity if customers told HMRC that they could not engage with them. HMRC have also had to reduce their estimate of future revenue benefit of some compliance interventions because of the state of the economy and what we expect to lose, he added.

Lack of take-up

Labour’s Olivia Blake asked why some employers and self-employed individuals did not claim the support on offer, even though they appeared to be entitled to it. Jo Rowland claimed the ones that did not claim the SEISS would have been because they assessed themselves as not being suitable under that criteria. HMRC originally estimated that about 3.4 million people were potentially eligible for the SEISS and ultimately, about 2.7 million claimed, said Harra; the gap is down to people not being adversely affected by COVID-19 and businesses that have ceased trading.


Beth Russell told Blake the difference from an employer’s perspective between the job support scheme and the extension of CJRS in a tier 3 area if you are a business told to close, is not that great. Regional data from the furlough scheme in the last few months shows some difference between different areas. For example, there has been more take-up in London than other areas of the country. The average take-up rate is about 11 per cent, but it is 13 per cent in London.


The Treasury will do a proper evaluation of the CJRS, and will announce more details of that shortly. It will be made public. Surveys conducted by the Cabinet Office have reassured HMRC that their communications have been effective, said Jo Rowland.

£500 for isolating and universal credit top-up

Olivia Blake asked about take-up of the £500 isolation payment and universal credit top-up, but Beth Russell said it is too soon for an evaluation of £500 isolating money and the DWP will have data on universal credit claimants.

CJRS and saving jobs

Blake asked about the extent that CJRS has simply deferred the move of millions of jobs into unemployment. And asked how many jobs the extension of CJRS will save over the next six months. Sir Tom Scholar answered that we will not [know] until later whether we are looking at a short-term, cyclical impact on the labour market or whether there is a structural change.

Sir Tom suggested a consequence of an early vaccine would be a much lower take-up of CJRS.


SNP’s Peter Grant disagreed with Sir Tom’s view that CJRS is operating equivalently. Grant said: “It operates in England when England is in lockdown; it does not operate in Wales when Wales is in lockdown. Can he understand why people in Wales right now maybe feel that Wales is not such an equal partner in the Union as it is supposed to be?”

Excluded people

Meg Hillier asked why people who have tax records are still not included in the scheme. Jim Harra explained more about SEISS. He said the last data that HMRC hold for who is self-employed and their income is the 2018-19 tax returns, which should all have been in before the self-employed scheme opened, although HMRC did allow a short window until the 23 April for people to make late returns. HMRC had as complete a database as possible before they ran the scheme. That remains the case. The 2019-20 tax returns are gradually coming in, but the end date for that is 31 January.

Did you give any consideration to how you could adapt systems to allow people to put in real-time information about their recent self-employed income? asked Hillier. Harra replied that if HMRC had opened up the scheme to self-declaration beyond that, there would have been two issues. One is that HMRC would have had to build something to capture that data and then manage the error or fraud risk that naturally arises. Jo Rowland revealed that HMRC considered in detail using data from early 2019-20 tax returns but: “While most of our taxpayers would have been perfectly legitimate in their approach, we know how attractive these schemes are to organised criminals, who would not hesitate to put in fictitious records for the sole purposes of claiming a grant.”

Peter Grant (pictured thanks to Parliament UK) complained that as well as those who were completely excluded, a significant number of self-employed people received support based on significantly lower earnings than they would now have if they had not been forced to shut down. Harra accepted this view but said it simply would not have been feasible for HMRC to come up with a scheme that forecast what people’s profits might have been in the current tax year and made grants based on that. Beth Russell intervened to say although people had to have a 2018-19 tax return, when determining the level of the grant, the Treasury looked back over three years - 2016-17, 2017-18 and 2018-19. So if people had a dip in income in the last year but higher income in the previous year, the averaging would have helped people with more fluctuating incomes, she argued.

Owner-directors/shareholder directors

Grant asked what HMRC have done to try to find a way to provide for people who are employees of a company in which they are also the main shareholder. Harra replied that the COVID-19 schemes were not aimed at supporting investors for the loss of investment income through dividends on their shareholdings. It is extremely difficult to define which dividend payments you might want to treat as being in lieu of salary, he said, adding: “On top of the difficulty of coming up with that definition, frankly we do not have any data to enable us to identify which dividend payments that people receive fall into that category. That position has not changed, and we still do not have any such data.” Grant responded that HMRC may not have that information, but Companies House has. Harra is not aware of an agreed definition of how you would actually define which dividends you wanted to catch here. He said: “If we had been able to come up with a definition of this type of dividend income, that is something that we might well have done before now.” The fact that this kind of planning and structuring, despite the tax loss that is associated with it, has continued for such a long time is an indication of how difficult it actually is to define and capture it.

Vulnerabilities in the scheme

Grant asked Jo Rowland whether she has identified additional potential fraud risks in CJRS or equivalents from the fact that employers can now back-claim funding for people who are no longer on their payroll. Rowland said HMRC carefully set the date so that it minimises that risk while continuing to make the scheme as flexible as possible.

Does HMRC have any plans to publish details of which firms have applied for and received furlough funding and how much funding they have received, or even what percentage of the workforce has been covered by it? asked Grant. Rowland said HMRC will make public businesses that make claims under the scheme from December onwards, adding ‘for now, it will be for the extended scheme’ [not the one which operated over the summer]. She went on to say HMRC’s risk and intelligence team uses the 72-hour window between claims being received and payments being released to make sure HMRC are identifying high-risk claims: “Where there is clear evidence of high risk, we might stop the payment there and then. Where there is suspected evidence, we might flag that as a high-risk claim for later downstream investigation.” Jim Harra said HMRC risk-assessed 11 million claims across the schemes before payment.


Dame Cheryl Gillan asked about whistleblowing. Rowland said it is true to say that not every whistleblowing call that comes into HMRC will have the merits that allow for full investigation. HMRC will investigate where there are suspicions, and they are well used to working with smaller employers and businesses, she added. Harra said: “Our hotline has so far received about 13,500 calls from people and we have reviewed all of them. We have packaged up cases that we think are worthy of investigation. Of the CJRS investigations that are currently under way, about 2,000 come from calls to the hotline.”

Tier system

Richard Holden, Conservative, asked if local authorities or devolved administrations will want to go to higher tiers in order to get cash, rather than stay at lower tiers and keep businesses open. Sir Tom said this is not something the Treasury is directly involved in—this is a public health matter—but the sense he has got from all of the discussions that he has heard, is that people are very keen to avoid the restrictions on normal life and economic activity that go with higher levels. They see the damage that higher levels do to jobs, livelihoods and wellbeing and, if anything, they would like to see more support in relation to that, not less, he said. From the state of the public debate, he does not really see that as an incentive, he added.

Working tax credits

Holden explained that some local authorities had paid out grants very quickly and as a consequence money had entered some people’s accounts in the last financial year, even though it is for support for this financial year, and those people are now being hit, some of them ‘really significantly’. He recently had a constituency case where somebody has had to pay tax on the money that arrived last year, and has lost their working tax credit from last year and is now losing their working tax credit from this year, due to assessments having been based on the idea that this grant money was income last year. Jim Harra said he was not familiar with this problem but he would look into Holden’s concerns.

Budget confirmed

Sir Tom Scholar confirmed there will be a Budget before the end of the financial year. He said: “There has to be a Budget before the end of the financial year because otherwise the Government cannot continue to raise income tax. There will certainly be a Budget. I said March, but no date has been announced. Typically, spring Budgets end up being in March. I can’t confirm that it is March and not February, or indeed the very beginning of April, but there has to be a Budget before the end of the financial year.”

The full session is here.

By Hamant Verma.