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The Chancellor, Rishi Sunak is set to give extensive powers to HMRC to investigate and penalise any businesses who have broken the rules in relation to the Government’s Coronavirus Job Retention Scheme (CJRS) in the new Finance Bill.
Those businesses that have broken Coronavirus support payment rules may face significant financial penalties as well as having to re-imburse the public purse for the support received. In addition it is expected that Companies who do not repay may face criminal prosecution for defrauding the public purse.
There is however likely to be a small window of opportunity for businesses to review their CJRS claims to make sure they complied with the strict rules of the scheme and to allow self-reporting of any failures before any penalties are likely to be imposed.
Failing to do this will lead to the imposition of a 100% tax rate on the payments that have been claimed in error which can be reduced if appropriate action is taken quickly. However, the reduction can only apply to leave a minimum 30% Tax rate where businesses have voluntarily disclosed or a minimum 50% if HMRC has already started raising questions. What this essentially means that every pound of wrongly claimed support is deemed to be a tax liability of the business in the same amount. HMRC will then uses its existing powers to pursue that unpaid tax to clawback the funds.
It is therefore possible that businesses who have incorrectly claimed payments could end up paying double the amount back once the penalties are taken into account. However HMRC have said that they do not intend to seek out cases of innocent error or minor mistakes of non compliance. It seems the focus for penalties will be on cases of deliberate non-compliance but where investigations are launched it seems that it will be the burden of businesses to show they did not break any rules.
The rules of the CJRS do not allow furloughed members of staff to undertake any work while receiving support under the scheme and it is expected that HMRC will, at least initially, focus its efforts on high profile businesses that it suspects may have broken the rules. There is also a concern that some businesses may not have passed on the furlough funds to staff in their entirety.
It is also expected that HMRC will be given powers to investigate and deal with claims under the Self-Employment Income Support Scheme (SEISS) or for companies that received assistance grants to help them navigate through the pandemic crisis.
The new measures are intended to ensure HMRC can properly investigate, recover and penalise where there has been a deliberate abuse of the scheme and the legislation is expected to become law next month.
In light of this it is strongly recommended that organisations who have received support double check the claims they have made or are about to make. As scheme rules are changing with effect from July there is likely to be an added level of complexity to the claims moving forward and so caution is the keyword as there is likely to be an increased risk of errors being made due to these changes.
Ansons have been assisting businesses and business owners throughout the Covid-19 crisis. For more information on our business legal services please visit our website at www.ansonssolicitors.com or call Neil Jones on 01543 431184.
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