Insights 10.6.20 Author: Reshma Johar

Assessments and Penalties of up to 100% Protecting Misuse of the COVID-19 Support Payments

Insights 10.06.2020 Author: Reshma Johar

Draft legislation suggests HMRC will gain powers to pursue anyone involved with claiming the support payments.

As soon as Rishi Sunak announced the various measures to support businesses during covid-19, HMRC had made it public knowledge that payments received by businesses under either the Coronavirus Job Retention Scheme (usually called the furlough scheme) or Self-Employment Income Support Scheme (SEISS) will be taxable in the hands of the recipient and that they would be checking the validity of the claims made.

HMRC have been under pressure in getting the appropriate systems in place to handle the various support payments available. Draft legislation has now been published which confirms that the payments will be taxable and ensures HMRC have investigation powers to be able to review any claims made. A penalty as high as 100% of the tax can be charged by HMRC on incorrect claims depending on the behaviour that led to the error.

Even more importantly, the draft legislation is seeking to give HMRC further powers on pursuing an individual connected to a company (including directors) to be jointly and severally liable to the assessments on the furlough scheme. This will only be in certain circumstances where a company is not able to pay over claimed amounts back.

Whilst at the moment it is not possible to make corrections using the HMRC online systems, we would strongly urge businesses to remedy any errors made as soon as they come to light. Businesses can notify HMRC in writing of any amendments and facilitate over payments that may have been made.

It is imperative for businesses to take adequate steps to understand the conditions of the various government covid-19 support payments. The furlough scheme has become more complicated with the introduction of the part time rules and care will be needed around the calculations. Businesses should be maintaining records to support the calculations as well as advice taken on the scheme.  It would also be sensible to maintain records on what is communicated to employees on the furlough scheme including their requirements.

HMRC intends to review cases and it will be necessary to back up claims with supporting evidence that steps had been taken to ensure conditions to the scheme had been met and that any errors had not been made deliberately.

What next?

If you have any questions regarding this article, please contact our tax team who will be happy to help.