As the lockdown has been lifted in parts of the UK and businesses are beginning to open, the end is also nigh for the Coronavirus Job Retention Scheme (CJRS) which will be closed to new applicants from the end of June. The scheme has helped millions of people during lockdown – paying up to £2,500 per month per employee and up to £14,070 for those claiming under the self-employment income support scheme (SEISS). But as is human nature there are always those who seek to take advantage of unfortunate situations and there have been numerous businesses falsely claiming COVID-19 grant and support payments.
Well, Rishi Sunak is having absolutely none of it and is set to add legislation to the Finance Bill next week that will grant HMRC “draconian” new powers to go after those who broke coronavirus payment rules and try to reclaim hundreds of millions of pounds in falsely claimed furlough payments.
Whilst “draconian” measures sound as if HMRC will set up stocks in the local town square and we can all hurl rotten fruit at the wrongdoers, it is simpler and much more effective than that. Instead, if HMRC suspect that rules have been broken (i.e. staff have been working during furlough and claiming via CJRS) then HMRC can impose a 100% tax rate on payments.
This effectively introduces a new tax band that has been made for the sole purpose of ensuring HMRC can use their existing powers to go after and prosecute these businesses that fail to pay tax demands for fraudulent payments.
Alongside this, HMRC are also to be handed powers to target recipients of the SEISS. If HMRC suspects that the business did not require a loan, or that a sole trader ceased trading after receiving a grant under the SEISS, then it will be able to put pressure on those being investigated to provide proof otherwise.
The additions to the Finance Bill that will grant these powers are set to come into effect mid-July. Once this legislation has been passed, any individual or business that received money from the CJRS or SEISS will have 30 days to self-declare a mistaken application and pay back the furlough cash or loan without penalty.
Down the line, once HMRC has filed accounts for the past and current year, if they decide a mistake has been made that still hasn’t been declared, then quite simply they will throw the book at you. Again, the onus will be on the accused to provide proof that they did not break any rules. If found liable then they will have to pay back 100% via tax payments. If they still do not pay this then they are liable for criminal prosecution.
Yikes. So what does this mean for you? Well, if you have been playing by the rules, then nothing! But just to be safe, if you have benefitted from either of the COVID-19 schemes then ensure you keep evidence that employees are correctly on furlough, have not been working whilst on furlough and that they would have been working still if the pandemic hadn’t happened, Also, keep detailed records of why you felt you were entitled to access payments under whichever scheme you claimed from.
But again, you have nothing to worry about if you have clean hands (no pun intended).