Many SMEs are making errors on their applications for the Government’s furlough scheme, meaning they will have to repay thousands of pounds back to HMRC later. Many small business applications for the furlough grant include the cost of their Employer’s National Insurance Contributions (NICs) for furloughed employees. However, for many SMEs that cost is already being covered by the Government.

Under the existing Employment Allowance, businesses that pay less than £100,000 in NICs each year can apply for up to £4,000 of tax relief on that bill. This relief is used by many micro-businesses to reduce their National Insurance bills to zero. HMRC is currently paying furlough scheme claims to businesses as quickly as possible – but those who over claim by mistake will have to pay that money back to HMRC later. This is an unexpected cost that they are unlikely to have budgeted for.

An unexpected bill of several thousand pounds from HMRC is the last thing small businesses will want to see as they fight to recover from the economic shock of coronavirus. If they are not very careful with their furlough scheme applications, they are putting themselves at risk of just that.