With most employers thoughts now turning to Rishi Sunak’s replacement for the Coronavirus Job Retention Scheme, or furlough scheme as it is more widely known, the ‘old’ scheme cannot yet be forgotten and neither will H M Revenue & Customs forget in a hurry.
Penalties & Corrections to the Coronavirus Job Retention Scheme
HMRC have already started to send letters to employers who have made CJRS claims inviting them to review their claim. The letters state that HMRC have received information to suggest that a grant was received for more than they were entitled to or the conditions to receive a grant had not been met. Such letters are not unusual and have been seen before for property owners, individuals with overseas assets etc, but can be red herrings as in many cases the individuals have done no wrong and it does cause an amount of stress amongst those who have nothing to hide and had taken professional advice to ensure their tax affairs were in order.
There has been a lot of commentary, both in the mainstream and professional press, about the scale of fraudulent claims made under the various Coronavirus Support Payments (CSP) provided by the government. HMRC will be charged by the government with the task of recovering these amounts and charging penalties to those who made these incorrect claims. It is expected that HMRC will seek prosecutions in some of these cases, especially in the earlier days, as the message is sent out that they will be taking a hard line on those who have exploited these schemes.
There has been a lot of commentary, about the scale of fraudulent claims made under various CSP
Rules & Claiming the CJRS
The rules currently state that any person who has made an error in claiming the CJRS must notify HMRC and repay the money by the latest of whichever date applies below:
- 90 days from receiving the CJRS money you’re not entitled to
- 90 days from the point circumstances changed so that you were no longer entitled to keep the CJRS grant
- 20 October 2020, if on or before 22 July you received CJRS money you were not entitled to, or if your circumstances changed.
Penalties and Time to Pay
A penalty will not be charged if the appropriate notification is made by the later of the above dates, with HMRC granting sole traders or partnerships a period of up to 31 January 2022, companies are given up to 12 months from the end of their accounting period, to repay the overclaimed amount.
These provisions only relate where an error was considered to be ‘innocent’, for example an inadvertent error in a CJRS calculation, however this can appear contradictory when looked at in conjunction with the deadlines already mentioned and HMRC further stating that any assessment raised should be paid within 30 days.
Any overpaid amounts will be assessed as a charge to income tax or corporation tax, to which HMRC will make an assessment, or, as their guidance states an adjustment should be made to the appropriate corporation tax return or self assessment tax return for the 2020/21 tax year where HMRC have not issued an assessment.
Should HMRC find a notification was required and has not been made, they will look to charge a penalty using the guidelines when working out a failure to notify penalty.
Where a fraudulent claim has been made HMRC will treat that as a deliberate and concealed error. This will mean a minimum penalty of 50% of the amount to be repaid with a maximum penalty of 100%. Where a claim is in excess of £25,000 HMRC will consider publishing the details of the individual or company that made the incorrect claim. It is well known that local papers scour these lists for details of individuals or companies that appear on them, and will likely make a big story of any local business that had been caught.
A minimum penalty of 50% of the amount to be repaid with a maximum penalty of 100%
Non-payment of overclaimed CJRS grants
It is worth noting that HMRC’s guidelines extend to the collection of CJRS grants from individual partners or directors, if their respective businesses cannot repay the overclaimed amount. Members of a partnership will be personally assessed on a joint and severally liable basis for the amount of the overclaim.
Company directors can become personally liable to repay any amount if it is found that they knew a company had overclaimed a grant at the time it was received, or a claim was not used for the intended purpose.
There is still time to make a correction
Provided HMRC receive a notification to make a correction to a grant by the end of 20 October 2020, then the risk of receiving a penalty for inadvertent errors can be avoided.
Even if you miss the 20 October deadline and become aware of an error, it is imperative that swift action is taken to avoid an enquiry being raised by HMRC. Penalties will always be lower for those who make a voluntary disclosure of errors and often the time to finalise an enquiry is shorter where a disclosure is made, helping to reduce professional fees where representation is required.
Contact ETC Tax – CJRS Grants
At ETC Tax we have a specialist team who can assist with making a notification to HMRC and seeking to provide the best possible outcome where a disclosure is required.
Please note this is only a general summary and is does not constitute advice. It is critical that you seek professional advice which is tailored to your specific circumstances.
We at ETC would be delighted to discuss any questions or concerns you may have. Contact us on 0161 711 1320 or email email@example.com – Like this article? You might also like info on Employee Share Schemes.
**Company directors can become personally liable to repay any amount.