Coronavirus Job Retention Scheme
From the 22 July 2020 the HMRC have been granted the statutory authority to claw back any non-entitled payments made to employers through the Coronavirus Job Retention Scheme and any other COVID 19 financial support payments. This will apply to recipients who claimed fraudulently and in cases where the claim was made by an honest error. The act will allow HMRC to bring both criminal and civil proceedings. Insolvent company directors and officers could be liable to personal action against them.
The HMRC has set out guidelines for those employers who made an honest error in claiming payments from the Coronavirus Job Retention Scheme. Employers can avoid penalties by undertaking proactive active steps to correct their errant claim.
Upon discovering the error whether it be an over payment or non-entitlement to a payment the employer must take active steps to inform the HMRC. There are two ways to do this. If the error is discovered immediately the employer can within 72 hours use the online HMRC service to cancel the claim. If an error is discovered later than this time period, the employer can amend the next claim submitted. The employer may also repay HMRC.
Incorrect claims
Where an employer makes a claim for the Coronavirus Job Retention Scheme that they are not entitled to, HMRC will to the extent of the unpaid amount charge income tax equivalent to 100% of the amount of the payment made under the Coronavirus Job Retention Scheme. Employers and companies will have to make the payment regardless of fault. Employers are responsible to inform HMRC of any incorrect Coronavirus Job Retention Scheme claims.
When HMRC have assessed an employer and they have been found liable to pay the money back, the payment must be paid within 30 days after the assessment date. After this period interest and penalties may be incurred by the employer.
Where HMRC does not carry out an assessment the employer is obliged to state any incorrect payments in their income tax or corporation tax return. The employer must inform HMRC of the error within 90 days, commencing from the date the grant was obtained or 90 days commencing from the date the grant was received that the employer was not entitled to due to changing circumstances.
For employers and companies who have made honest mistakes which are revealed outside of the 90-day period, HMRC has stated penalties will not imposed if any income tax liability is resolved. This must be done within 12 months from the end of the relevant period for companies and for employers the matter must be resolved by the 31 January 2022. HMRC will assess the penalties based on the employer’s conduct, those who have falsely claimed can face a 100% penalty and be named and shamed by HMRC. Placing a company into insolvency will not protect a director, officer or manager of a company, as the new law will allow HMRC to hold them jointly and severally liable.
In the case of a company insolvency, the directors and managers can face the possibility of joint and several liability. The HMRC can recover any income tax that should have paid by the company. The HMRC have will only take this action where it can be prove the individual was of the understanding the CJRS payments should not have been claimed.
Employer who believe they have underclaimed for the Coronavirus Job Retention Scheme should still speak to the HMRC. Employers should now as a matter of urgency conduct an internal accounts audit to ensure they correct any mistakes with the 90-day period of grace. Quick action can avoid unnecessary penalties being impose on you.
