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Markel Tax

11 Aug 2020

After the helping hand – HMRC enquiries into coronavirus grant payments

As the support for businesses starts to wind down, HMRC has started to make its position on abuse of the Coronavirus Job Retention Scheme (CJRS) clearer. Press releases on 28 July detailed the approach HMRC will take and the penalties that may apply where claims to the grants under the scheme were overstated.

Although some individuals may not have received all the financial support they would have liked, it cannot be disputed that the Government has spent a huge amount of taxpayer’s money in supporting employers through the lockdown period. The CJRS grant system was operated on a pay now, compliance check later basis due to the need to provide financial support as quickly as possible. This meant that some excessive claims, both deliberate and unintentional were paid out and HMRC now has to deal with recovering overpayments and determining how they arose.

A softly, softly approach

The initial approach is one of voluntary compliance to allow over claimed grants to be notified and repaid to HMRC. The guidance details the period during which notifications may be made and the timing and methods for repayments. HMRC will be carrying out reviews where they become aware of abuse of the schemes, which are not voluntarily disclosed; we have come across situations where this already happening following employee complaints.
Making a voluntary notification should prevent penalties being applied. The press releases seems to suggest that penalties will only be sought where HMRC has to take action to collect over claimed amounts. The press releases provided details of both the CJRS and the SEISS voluntary notification and repayment regimes in two fact sheets.

Notifying HMRC of a CJRS over claim

Employers can either tell HMRC about the over-claimed amount on their next claim or, if no further claims are to be made, by contacting HMRC direct. Where the over-claimed amount has not been repaid employers have a fixed time in which to let HMRC know of the issues (the notification period). The notification period ends on the latest of the following dates:
  • 90 days after you receive a CJRS grant you are not entitled to

  • 90 days after the day circumstances changed so that you were no longer entitled to keep the CJRS grant

  • 20 October 2020

HMRC has confirmed they will not charge a penalty where an employer did not know they had been overpaid a CJRS grant at the time it was received, or at the time that circumstances changed, meaning that entitlement came to an end or reduced and the overpayment has not been repaid. Sole traders or partnerships have until, 31 January 2022 to repay the excess grant. For companies, the relevant time period ends 12 months from the end of their accounting period.

HMRC recovery of overpayments

HMRC may recover the overpaid grant by making a tax assessment for the amount the employer was not entitled to where it has not already been repaid. The recovered amount will cover both amounts over claimed or not used to pay furloughed employee wages and associated costs (employer’s NIC and pension where the grant included these).

Payment will become due 30 days after the date the assessment is issued. Interest will be charged on late payments. Late payment penalties may also be charged where the amount remains unpaid 31 days after the due date.

If HMRC do not raise an assessment then employers must include the details of the overpaid grant on the appropriate corporation tax return or on their 2020 to 2021 self-assessment tax return.

After the helping hand, the iron fist

If a company becomes insolvent and is unable to repay any overpaid CJRS grant, the liability may be transferred to a company officer. This will be done where the officer knew the company had over claimed the grant - either at the time it was received or at some later time – and/or that the claim was overpaid or not used for the intended purpose.

It is vital that employers take the time to review the claims they have made and reconcile them to the amounts paid out to ensure that no overpayments occurred and that all of the grant received was used for its intended purposes. Because of the personal liability risk arising on company officers, this review is doubly important for corporate employers.

If you need any further information please contact David Geldard or David Harmer at Markel Tax on 0333 920 5708.

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Tagged HMRC Tax investigations COVID-19
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