Following the arrest of a man on suspicion of defrauding the government’s Coronavirus Job Retention Scheme (CJRS) by £495,000, HMRC has now published guidance to help employers who have received grants under the scheme that they were not entitled to receive.
The guidance recognises that there are two situations where an overclaimed grant may occur:
- Where an employer was given a grant that they were not entitled to receive, for example because they made an error when completing their claim or because they have misused the scheme by, for instance, claiming a grant while expecting furloughed workers to continue to work for them
- Where a genuine claim was made but an employer’s circumstances change so that they are no longer entitled to keep all of the grant they received, for example because the employee they claimed for left their employment, but they continued to receive a grant in respect of that employee
It is worth noting that where an employer has claimed too little a grant the employer still needs to ensure it pays its employees the correct amount and will need to contact HMRC to amend the claim. However, after 31 July employers will not be able to amend a claim relating to the period up to 30 June for instance to add an employee that should have been included on a claim submitted before that date.
Dealing with mistakes
Given the complexity of the rules around claiming under the scheme it is not surprising that mistakes will be made and that employers may unwittingly claim for a greater grant than they are entitled to. The government recognises this and has put in place a mechanism for employers to pay back any money received which they are not entitled to.
If an employer notices the mistake straight away, then they can delete the claim in the online service within 72 hours of submitting it.
Where an employer realises it has received too much money, they must pay this back to HMRC but can do so in the next online claim they make. The new claim will be reduced, and the employer will need to keep a record of the adjustment for 6 years. Only where the employer does not intend to make a further claim under the scheme will they need to contact HMRC to explain the error and arrange repayment.
It is important to bear in mind the timescales for notification where an employer has overclaimed a grant and not repaid it immediately. Employers should ensure they notify HMRC of the overclaimed grant by the latest of:
- 90 days after the date of receiving the grant they are not entitled to
- 90 days of when circumstances changed so that they were no longer entitled to keep the grant
- 20 October 2020
Failure to notify within these timescales could result in a penalty and failure to repay the grant within the relevant time period may result in a potential tax liability (see below).
The government has introduced legislation to enable it to recover any amount of the grant that has been overpaid in circumstances where the employer does not voluntarily make a repayment. HMRC has confirmed it will be starting to audit claims and will address deliberate non-compliance and criminal attacks, as the recent arrest mentioned above demonstrates.
HMRC will recover the full amount of the overpaid grant by making a tax assessment for the amount the employer was not entitled to and has not repaid. This means that an assessment of up to 100% could be charged on the amount of the grant received or kept where there was no entitlement to do so.
It is worth noting that company officers, who either knew the company had overclaimed a grant at the time it was received or knew when a tax liability arose the claim was overpaid or not used for the intended purpose, can be made personally liable to pay the tax charged on their companies overpaid grants in circumstances where the company is in insolvency and the tax cannot be recovered from the company.
Payment of the amount assessed is due within 30 days and interest will be charged on late payments.
In addition to interest, HMRC may also charge late payment penalties if the amount remains unpaid 31 days after the due date.
Penalties may also be charged if the employer does not notify HMRC within the notification period set out above that they have overclaimed the grant. In deciding whether to charge a penalty, HMRC will take into account the employer’s knowledge of the overpayment and the requirement to repay.
Details of penalties will also be published where there has been a deliberate act or failure to act on the part of the employer, meaning there is reputational risk for employers who do not comply with the scheme rules.