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Markel Tax

15 Sep 2020

Compliance Countdown: time is running out for penalty-free corrections to CJRS and SEISS claims

Now that the countdown has begun to the 20 October 2020 deadline for correcting CJRS & SEISS claims, Steve Price and Jacqui Mann discuss how HMRC will progress its compliance activities and the potentially serious consequences for taxpayers who do not comply.

Claims should be carefully checked

It is vital for taxpayers and agents alike to check all CJRS & SEISS claims made against the latest scheme guidance and make any necessary corrections before the deadline now confirmed as 20th October 2020.   

If this opportunity to make these checks is not taken and HMRC later establish that claims are incorrect, taxpayers will face penalties beginning at 50%, rising to as much as 100%, of the over-claimed amounts, effectively doubling the amount that will have to be repaid to HMRC.

Compliance activity has already begun

HMRC’s compliance activity has already begun and there is an increasing amount of press coverage about the extent of incorrect and fraudulent CJRS & SEISS claims. This was crystallised on 8th September when HMRC’s Chief Executive, Jim Harra, reported to the Public Accounts Committee that an estimated £3.5bn has been paid out in fraudulent or erroneous claims.  Mr Harra made it clear that this would not be tolerated and that HMRC would dedicate itself to tackling any abuse.  This ongoing publicity will certainly encourage those who know they have incorrectly claimed to put their house in order sooner rather than later and can only serve to assist HMRC in their task.

Not a scatter-gun approach

HMRC has said that it has identified around 27,000 high-risk claims and that it has already commenced enquiries into around 40% of this number. These cases are likely to have been identified through HMRC’s own risk analysis using RTI data, together with the reported 8,000 calls made to its CJRS Fraud Hotline.  

In line with reported commentary, Markel Tax has already started to see evidence of HMRC’s targeted letters sent to those taxpayers whose claims are considered likely to be erroneous or fraudulent. It appears that these letters are being issued in tranches of 3,000 with the first issued in mid- August and it is understood that further similar batches are ready and waiting to be issued. Unlike the scatter-gun approach seen in other ‘nudge’ letter campaigns by HMRC, in view of the data available to HMRC, there is good reason to believe that there is a risk, rather than the likelihood of one.  

The letters typically suggest that based on information held, the taxpayer’s CJRS claims may be erroneous and come with a clear warning that a failure to respond within 30 days may result in a formal compliance check. If this happens it is highly unlikely that these checks will be confined to the CJRS/SEISS claims and will almost certainly extend to other areas of the business as well, especially where HMRC believe the cause of the error may be fraudulent activity.

The letters seen so far by Markel Tax have been issued by the Customer Care Group, under the umbrella of HMRC’s Campaigns and Projects banner, entitled ‘CJRS Post Payment Compliance’.  This suggests that HMRC are not assuming from the outset that all erroneous claims are fraudulent, but equally it does not mean to say that HMRC’s Fraud Investigation Service (FIS) will not be involved in other cases, or that appropriate cases will not be escalated to that team if necessary, as we know from earlier press reports that some serious cases were taken up by HMRC’s criminal investigation teams.

Procrastination is the thief of time

These letters should not be ignored; they are a final opportunity for review and correction prior to HMRC intervention and, if pre 20th October, before costly penalties will apply. So anyone receiving one must act quickly to respond.

Many will ask why, if they are happy with their original claim, should they bother to reply at all? Applying logic to the situation, it quickly becomes clear that if HMRC find themselves in possession of some information that troubles them enough to cause them to put pen to paper, until that trouble is resolved to their satisfaction, the matter cannot be closed. Half-hearted responses or the absence of any response, will not halt HMRC’s compliance machinery.

Accordingly, it is certain that taxpayers who ignore HMRC’s invitation will only find themselves under more intense scrutiny, not only leaving themselves open to formal assessments for the amounts that need to be paid back, severe penalty charges and interest, but also to the additional stress and uncertainty brought about by a formal compliance review. Such a review is likely to expand well beyond the bounds of CJRS and so will be far more disruptive for the business, at a time when businesses and especially those that have needed to rely on CJRS payments, can ill-afford any further disruption.

It should be mentioned at this point, that by comparison to CJRS, there appears to have been little publicity about erroneous SEISS claims, however, these payments fall under the same legislation and as such are subject to exactly the same deadline for correction, before penalties will apply.

Act now to save your clients money or buy them peace of mind

Whether or not your clients are in receipt of one of these letters from HMRC, now is the time to ensure that their CJRS & SEISS claims are in order. If taxpayers or agents are in any doubt about their claims, seeking an independent third-party review could prove to be a sound investment, as in the event that HMRC do discover an error at some later date, it will demonstrate that the claimant took HMRC’s warnings seriously at the time, which will help with the penalty position.

Time is running out fast and HMRC’s intentions are clear. Once the 20th October 2020 deadline has passed, the opportunity for avoiding penalties in respect of previous claims will be gone. In the meantime those in receipt of CJRS compliance letters from HMRC should not waste time deciding whether to reply, but instead seek the appropriate advice to ensure they provide the right response.

For more information on HMRC’s activity in relation to CJRS, contact Steve Price or Jacqueline Mann

Steve Price and Jacqui Mann have written a series of articles on HMRC compliance activity in relation to CJRS and these can all be found on our website:

https://www.markeltax.co.uk/industry-news/cjrs-hmrcs-compliance-powers-2020-finance-bill
https://www.markeltax.co.uk/industry-news/avoiding-the-pitfalls-of-cjrs-claims
https://www.markeltax.co.uk/industry-news/cjrs-hmrc’s-compliance-activity-moves-closer
https://www.markeltax.co.uk/industry-news/how-hmrc-tackle-compliance-of-the-cjrs
https://www.markeltax.co.uk/industry-news/crjs-implications-claims-wrong

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