for Business owners that broke Coronavirus payment rules for both the CJRS and the SIESS.
With the lockdown being lifted in parts of the UK and businesses start the process of re-opening, HMRC will now be looking to ensure all those that got help did it correctly.
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 will always be those who seek to take advantage of the system and will have been falsely claiming COVID-19 grant and support payments.
Rishi Sunak 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.
What does ‘Draconian’ mean?
Whilst “draconian” sounds like a torture from medieval times, it is simpler, but just as harsh as one! 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.
This will mean that not only will they have to pay the fraudulent amount back, but they will also have to pay the same amount again in a fine.
Alongside this, HMRC are also to be handed powers to target recipients of the SEISS. If HMRC suspects that the business did not require the grant, 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.
When will these powers come into effect?
The additions to the Finance Bill 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.
After businesses and sole traders have filed accounts for the past and current year, if HMRC then decide a mistake has been made that still hasn’t been declared, then quite simply they will go town on 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 it all back via the 100% tax rate. If they still do not pay this then they are liable for criminal prosecution.
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 benefited 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.
