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Markel Tax

15 May 2020

How will HMRC tackle compliance of the Coronavirus Job Retention Scheme?

In their recent article Steve Price and Jacqui Mann introduced the compliance aspect of the Coronavirus Job Retention Scheme (CJRS) claims. This follow-up article considers the practical aspects of HMRC challenging employers’ claims.

On 12 May, HMRC announced that CJRS will be extended until October 2020 which is welcome news to businesses with furloughed employees. While it is expected that employers will be required to share the burden of payment with the government, with more details being released towards the end of May, the additional pressures on the public purse will inevitably lead to HMRC robustly policing the scheme retrospectively.

As the CJRS is vital to the survival of businesses across the UK, HMRC is under pressure to process claims and make payment of grants as quickly as possible. This creates another ‘process now, check later’ regime, similar to self assessment.

Claims which are clearly invalid are likely to be rejected upon receipt. However, while the vast majority will be processed and paid seemingly without challenge in the first instance, they will undoubtedly be risk-assessed for a compliance check at a later date.

The timing of these checks will be politically sensitive as the government, through HMRC, will not wish to be seen to be harassing businesses at a time when they are fighting for their very survival. On the other hand, the public will need to be assured that employers have not benefited from erroneous or fraudulent claims as moral and financial considerations come into play. It is inevitable that at some point HMRC will need to start challenging these claims.

While it has been questioned whether HMRC will be given specific powers to tackle the compliance aspect of CJRS claims, existing legislation should be sufficient for dealing with the CJRS enquiries.
Depending on the level of concern it has about a particular claim, HMRC may initially use ‘leverage’ letters encouraging employers to recheck their claims and amend them if necessary. This is a similar tactic to that widely used in other projects over the past few years such as those aimed at UK resident holders of offshore bank accounts.

In potentially more serious cases, and where ‘leverage’ letters have been ignored, HMRC may follow up with formal enquiries under sections 9A or 12AC TMA 1970 for individuals and partnerships or paragraph 24(1) Sch18 FA 1998 for companies. These will check if the CJRS grant has been included in business turnover and that the corresponding expense item, the payment of the grant to employees, has been correctly calculated.

HMRC could also turn to its discovery provisions under section 29 TMA 1970 where a formal enquiry is not possible.

Perhaps much more likely in the immediate term, is that HMRC will choose to assess the validity of claims through employer compliance checks which would extend to checking if the grant has been included in declared turnover.

The most serious cases involving potential fraud will be subject to scrutiny by HMRC’s Fraud Investigation Service and could ultimately lead to investigations under Code of Practice 9, or even criminal prosecution.
Whichever method it chooses, and subject to the relevant time limits, HMRC will have a window of at least four years to challenge claims and recover excessive or overpaid grants as well as interest and penalties.

Employers should, therefore, check their claims now and notify HMRC of any amendments required to avoid being targeted for a compliance check later. At the time of writing HMRC had just announced plans to introduce a process for amending claims which is likely to be similar to amending self-assessment returns. However, in the meantime employers are encouraged to contact HMRC’s dedicated helpline or Webchat facility.

We will be considering HMRC’s likely areas of concern in our next CJRS article but in the meantime if you would like to discuss any aspects of the CJRS or need help with claims please contact our Tax Investigations team or or call Markel Tax on 0333 920 5708.

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Tagged Tax Investigations Tax investigations Tax investigations COVID-19
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