HMRC to claw back aid and charge tough penalties

It is estimated that up to 34% of employees have been asked by their bosses to work while being furloughed, and HMRC has already received in excess of 3,000 claims – mainly from employees – of abuse of the furlough scheme.

Under legislation due to be enacted early next month, where businesses are found to have breached the Government's terms when claiming aid due to COVID 19, these businesses will not only be asked to repay the aid given but may also face substantial penalties and even criminal proceedings.

HMRC are initially focussing on the coronavirus job retention scheme (CJRS) and also the self-employment income support scheme (SEISS).

Random spot checks are likely to take place, to check for instances of non-compliance from unscrupulous companies who have not already been flagged up by way of the reporting system. Penalties for those found guilty are likely to include fines for companies, while directors of companies which have subsequently been liquidated could face personal liability for falsely claimed furlough costs.

HMRC will be investigating where they suspect:

  1. organisations have claimed without suffering any loss due to COVID 19; and
  2. under the CJRS scheme, claims have been made but the furloughed staff have worked at any time during any period.

HMRC will have the power to charge a penalty of 100% of aid incorrectly claimed and will prosecute those businesses who do not repay the aid.

For those who have made invalid claims, the legislation will allow businesses 30 days from its enactment to inform HMRC about mistakenly claiming – whether accidentally or deliberately – in exchange for the opportunity to right their wrongs by repaying money falsely claimed, without being subject to additional penalties.

It is important, therefore, that:

  1. all claimants have records to back up their claim(s);
  2. claimants check that the claim was legitimate before the 30 days expire; and
  3. if they find they have made an error, inform HMRC immediately.
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