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Pressure to act unethically - CJRS and other government support schemes

Information and advice to help both practice and business members resist pressure to act unethically.

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Issue: July 2020
Last reviewed: August 2020


Members are often pivotal in ensuring that businesses obtain access to government funds (and government-backed loans) vital to the survival of many businesses. Businesses are also looking to the future to ensure they are in as healthy a position as possible when coming out of the current emergency. Unfortunately, when staff are furloughed the twin goals of obtaining government funding and maintaining viability can come into conflict if employers ask employees to assist the business in a way that breaches the furlough conditions (or for directors to do likewise) during the hours on which they are on furlough. Likewise, businesses under financial strain may be tempted to apply for the Bounce Back Loan Scheme in circumstances where they do not meet the eligibility criteria.

This information sheet provides guidance to both practice and business members to help them resist pressure to act unethically and includes relevant references to help explain their position to clients and employers. It concentrates on the circumstances of the Coronavirus Job Retention Scheme (CJRS), but the principles can be applied to other forms of government assistance.

Furlough requirements

COVID 19 has raised many challenges for members including grappling with the rules and requirements of the Coronavirus Job Retention Scheme.

Initially there was some debate as to what directors and employees could and couldn't do during the hours which they are on furlough. Since then, greater clarity has been achieved. Government guidance for employees can be accessed on the gov.uk website under Business support for COVID 19. The original guidance said:

‘To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation or any linked or associated organisation. This includes providing services or generating revenue. Employers are free to consider allocating any critical business tasks to staff that are not furloughed.’

For directors on furlough it said:

‘Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.’

Current government guidance says:

‘During hours which you record your employee as being on furlough, you cannot ask them to do any work for you that:

  • Makes money for your organisation or any organisation linked or associated with your organisation
  • Provides services for your organisation or any organisation linked or associated with your organisation’

Although these rules have been widely publicised, and there is now far less scope for misunderstanding, the requirements are not always being met. This is challenging for members in business, for example, if they are pressurised by their employer to breach the requirements or for members in practice if they observe a breach of the requirements by clients.

ICAEW code of ethics

Members must comply with the fundamental principles of the ICAEW Code of Ethics. These require them to act with integrity (being straightforward and honest in professional and business relationships) and objectivity (not allowing professional or business judgment to be compromised due to bias, conflict of interest or undue influence of others).

In particular, para R111.2 states that:

A professional accountant shall not knowingly be associated with reports, returns, communications or other information where the accountant believes that the information:

(a) contains a materially false or misleading statement;
(b) contains statements or information provided recklessly; or
(c) omits or obscures required information where such omission or obscurity would be misleading.

Professional accountants will therefore be concerned if asked to be associated with what they believe is a misleading CJRS claim.

As the professional accountant must not be associated with a misleading claim, the member needs to take steps to address such issues: ICAEW Framework for resolving ethical problems provides guidance.

Following this framework, members should check their understanding of the eligibility conditions and whether the claim fails to meet those criteria (‘check the facts’).

The ICAEW Code of Ethics now has specific guidance on ‘Responding to non-compliance with laws and regulations’ (section 260 for members in business and section 360 for members in practice). Members might want to consult either internally or externally on a confidential basis (ICAEW Code of Ethics R260.12 A2, R360.29 A2).

In the first instance, (whether for a member in business or in practice) discussion might take place with immediate management to seek to deter the non-compliance where it has not yet occurred. Failing this, the discussions would usually be escalated to the next tier of management and ultimately to those charged with governance. Members should document their own ethical deliberations and follow up any informal discussions with written communications where there is any doubt that their advice has not yet been followed.

If it subsequently becomes clear that a past CJRS claim has been erroneous, but at the time the professional accountant believed it to be compliant, then the professional accountant needs to raise this with the employer/client and take steps to be disassociated from that information or ensure corrective action is taken.

For members in business, the employing organisations internal procedures could assist in identifying who to approach to gain authority to rectify incorrect claims.

It is a requirement to adjust for past overpayments when making a subsequent claim (records should be kept for six years). If there is no plan to make a subsequent claim then HMRC should be contacted to inform them of the error and follow their instructions to pay back any over-claimed amounts. Retain the reference number given and the evidence of the repayment.

The member should document their own ethical considerations, actions taken and the basis for conclusions. Be clear as to your position and be able to evidence those communications in writing to the employer/client in the event that an informal approach does not yield the desired outcome.

Hopefully persuasive arguments can be advanced and an acceptable resolution found.

What if the employer/client is unwilling to address the issue?

Where employers/clients are reluctant to correct the claim the member may find it helpful to stress that HMRC will have the right to review the claims for 5 years. It is also worth recommending that legal advice is sought to establish if an erroneous claim would be an offence under the Fraud Act 2006 and whether there are any implications under the Company Directors Disqualification Act 1986.

Given the nature of the dilemma and the importance of cash flow to many businesses at this time, there may be no easy answer for the professional accountant if there is no willingness on the part of the employer/client to either inform HMRC or regularise the situation.

For members in business, junior members of staff may be able to meet the requirements of the ICAEW Code of Ethics by raising their concerns and documenting their actions. However, if it remains unresolved, this dilemma can mean that you feel your position is untenable. Particularly as the most senior accountant/director in a business you may ultimately feel that you wish to resign. Resignation is a last resort and before taking such a step it would be wise to take advice. ICAEW's confidential helpline (see details below) may be able to support you in considering alternative courses of action and you should also seek employment law advice to protect your own interests. See the Support Member Scheme Information sheet Finding a solicitor.

Members in practice will need to consider ceasing to act for the client. It would be advisable to formally document the firm's position on non-compliance in writing to the client, pointing out the technical/factual aspects that the client has not complied with. Reference can also be made to this in the disengagement letter and in any response to a professional enquiry.

Members in practice (and those members in business within the anti-money laundering regulated sector) also need to consider their anti-money laundering obligations found in CCAB Anti-money laundering guidance for the accountancy sector. Care should be taken to avoid ‘tipping off’.

Depending on their industry sector, members in business may have a legal obligation to report non-compliance to the employer's regulator. If in doubt, legal advice should be sought.

In extremely rare situations where there is evidence that an ICAEW member or member firm is involved in a dishonest CJRS claim then the duty to report misconduct to ICAEW Professional Conduct Department will be triggered.

Members are usually bound by the fundamental principle of confidentiality to an employer or client. However, this does not apply when there is a legal obligation to report wrongdoing or a duty under the ICAEW Disciplinary by-laws to report misconduct. Moreover, the ICAEW Code of Ethics ‘Responding to non-compliance with laws and regulations’, summarised in New Code of Ethics – NOCLAR explains that it is also possible in certain circumstances to override confidentiality in the public interest and disclose non-compliance to a relevant regulator or other external body.

Ethical issues arising from other government suppport schemes

The nature of the unethical pressure can vary from one support scheme to another, but the principles and approach discussed above can also be applied when there is pressure to act unethically with regards to other forms of government assistance.

For example, with regard to the self-declaration of eligibility for the Bounce Back Loan Scheme, members would need to ensure that they are not associated with a materially false or misleading statement, such as claiming eligibility when it is false that the business is not using the Coronavirus Business Interruption Loan Scheme, or it is false that the business has been impacted by the coronavirus pandemic. If it subsequently becomes clear that the self-declaration is materially false or misleading, then the member needs to take steps to be disassociated from that information or ensure corrective action is undertaken.

If in doubt seek advice

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss confidentially their specific situation with the Technical Advisory Service on +44 (0)1908 248 250, via webchat or e-mail technicalenquiries@icaew.com. Technical support as to eligibility for the CJRS can be obtained from ICAEW Technical Advisory Service. Further ethical advice when an over-claim has already been made may be sought by ringing the ICAEW Technical Advisory Service anti-money laundering helpline anonymously.

It may be helpful to speak to another member about your circumstances. Support members are available to help and you can contact them directly using the information at icaew.com/support

About the Support Member Scheme

The Support Members Scheme provides support to members of ICAEW who are in difficulty. The support members offer totally confidential, non-judgemental telephone or other support to members of any age, in any circumstances and relating to your professional or personal life. They are trained to listen and are familiar with all of ICAEW's relevant procedures as well as other specialised helplines and resources. Support members themselves come from a variety of backgrounds but are all members of ICAEW committed to helping other members.

If you feel you could benefit from discussing your situation with a support member, please contact the scheme on +44(0)800 917 3526 or email support.members@icaew.com. You can also contact support members direct using the information available on the website at icaew.com/supportmembers. Contact with a support member remains 100% confidential with volunteers exempt from the duty to report misconduct, enabling you to speak freely without fear of recrimination or repercussion.

Terms and conditions

© ICAEW 2020  All rights reserved.

ICAEW cannot accept responsibility for any person acting or refraining to act as a result of any material contained in this helpsheet. This helpsheet is designed to alert members to an important issue of general application. It is not intended to be a definitive statement covering all aspects but is a brief comment on a specific point.

ICAEW members have permission to use and reproduce this helpsheet on the following conditions:

  • This permission is strictly limited to ICAEW members only who are using the helpsheet for guidance only.
  • The helpsheet is to be reproduced for personal, non-commercial use only and is not for re-distribution.

For further details members are invited to telephone the Technical Advisory Service T +44 (0)1908 248250. The Technical Advisory Service comprises the technical enquiries, ethics advice and anti-money laundering helplines. For further details visit icaew.com/tas.