HMRC have recently announced that they will tackle any abuse of the Coronavirus Job Retention Scheme and the self-employed scheme by bringing in new legislation. So far, these schemes have cost the UK taxpayer more than £70 billion.
This new tax legislation is being rushed in after a short consultation period ended recently, with the new law expected to be in place in July 2020. The proposed legislation is expected to introduce a 30-day window for employers to admit and notify HMRC of any errors of deliberate abuse.
“It is clear that HMRC are now putting in place legislation that will allow them to deal swiftly and effectively with fraudulent or incorrect claims for COVID-19 related payments (Praveen Gupta, Partner, National Head of Tax)”
There are various ways that an employer may potentially misuse the scheme, and HMRC is reviewing all of these through their well-established Risk & Intelligence Service and in addition there is an online facility for individuals to notify HMRC of suspected employer abuse of the scheme.
There are a number of concerns that the Government have on how these COVID-19 related schemes are being abused however we also recognise that due to the complexity of the rules, some companies could be making genuine mistakes.
At a time when HMRC will be receiving materially lower tax revenue due to the closure of businesses and the deferral of certain taxes, there will be pressure on HMRC to take action where they suspect either fraud or that mistakes have been made.
In May 2020, just two months since the furlough scheme was introduced, HMRC went on record that they are already conducting over 3,000 investigations into furlough “abuse” relating to their claim of potential misuse of the scheme. It is recommended that employers keep furloughed records for five years as it is likely that retrospective checks may be undertaken if HMRC believe there has been some level of misuse.
If HMRC determine that an employer has fallen foul of the scheme, then at the very least they will expect the overpaid amounts to be returned along with interest. There is also the strong likelihood that a range of financial penalties will be chargeable to that employer, with deliberate misuse attracting higher penalties than those who were careless. In the worst cases, HMRC are likely to seek to investigate criminally.
HMRC’s approach, when they find misuse, will also likely be that they will also escalate those enquiries by looking into other areas of the employers and business owners tax affairs. HMRC’s view is that if a taxpayer is treating their affairs incorrectly, or misusing the furlough scheme, then there is a strong chance that they are doing it in other areas.
How we can support you
We offer our clients membership of a Tax Investigation Fee Protection Service which for a fixed amount of money you and your business would (subject to the scheme rules and acceptance) be covered for our fees to act for you in the unfortunate event that you are selected for an HMRC enquiry provided you have joined the service before the date of contact by HMRC (subject to terms and conditions).
This service can support you with:
- Cases where no misuse has taken place, but HMRC believe that it has.
- Cases where misuse has occurred as a result of carelessness, but HMRC are treating it as deliberate.
- Cases where HMRC are looking to expand the enquiry into other areas of the employer’s tax affairs.
If you are not already a member of our Tax Investigation Protection Service and would like to join or learn more about it, then please speak to your usual relationship Partner, Director or Manager or contact a member of the Campbell Dallas Tax team.
The information in this update should not be regarded as financial advice. This is based on our understanding on 24 June 2020. Laws and tax rules may change in the future.