HM Revenue and Customs (HMRC) have issued two new compliance fact sheets which contain measures to ensure that the Coronavirus Job Retention Scheme (CJRS) and the Self-Employment Income Support Scheme (SEISS) payments can be clawed back where they were not due. Any business or individual that has received these payments and was not entitled to that payment have been given until 20 October 2020 to notify HMRC that they wish to repay the support payments they received.
How will HMRC claw back the amounts?
HMRC will issue a tax assessment for the amount that should not have been paid or not repaid back to them. For companies, the assessment will also include any amounts that the company has not used to pay furloughed employee wages and associated costs within a reasonable period. For example, you received a payment of £5,000 which you should not have received, the assessment will charge tax at the rate of 100% giving a total due to HMRC of £5,000.
When will I need to pay the assessment?
The amount charged will be due 30 days after the date of the assessment.
What happens if I don’t repay by 20 October and HMRC do not issue an assessment?
Where HMRC do not issue an assessment, they have stated that any payments that should not have been claimed, must be included in the appropriate tax return. For a company – the Corporation Tax return. For individuals – their self assessment tax return. Further guidance will be issued on this when the returns for 2021 are issued.
Will HMRC charge interest and Penalties?
HMRC will charge interest at the usual rates and penalties will apply. When deciding the amount of any penalty, HMRC will take into account whether you knew you were entitled to the grant when you received it, or you knew when it became repayable or chargeable to tax because your circumstances changed. HMRC have stated that they will treat this as deliberate and concealed. This means a penalty of up to 100% could be charged on the amount of the grant that you were not entitled to and had not repaid by the last day of the notification period.
Will HMRC check other COVID-19 Support Payments?
More than likely HMRC will investigate all payments they have made during the pandemic.
What happens if the company has become insolvent?
If the directors and officers of the company knew the company had over-claimed a CJRS grant at the time it was received or knew at such other time when a tax liability arose the claim was overpaid or not used for its intended purpose, the officers can be made personally liable to pay the tax charged on the company’s overpaid CJRS grants.
When will HMRC begin their investigations?
We expect HMRC to begin their investigations in the next few months. This is because the Government has paid out billions in COVID-19 support to business and individuals and are keen to recover some of this. In addition, HMRC have received an extraordinary amount of reports of potential deliberate abuses of the CJRS and will be keen to send a message to the public that such behaviours are not tolerated.
What do I need to do now?
All businesses and self employed individuals should review their positions in readiness of an HMRC investigation taking into account all Government COVID-19 support payments. HMRC’s starting point in any investigation is that all errors were carried out knowingly. Therefore, it is important to carry out an internal review to ensure that all records and payments, as well evidence are gathered, to show employees were not asked or requested to work while on furlough. You should keep this audit trail in case HMRC make an enquiry. However, where you do find a discrepancy, you will need to carry out a more detailed investigation (such as reviewing internal communications) which may result in making a disclosure/notification to HMRC by the 22 October deadline.
Please contact our tax team if you have any questions. The tax team have a wealth of experience in dealing with tax investigations and resolving matters with HMRC. In addition, we can assist with a review of your entitlement to the various grants and can assist you with making a disclosure/notification to HMRC if necessary.