HM Revenue & Customs (HMRC) have written to 3,000 employers they believe may need to repay some or all of their Coronavirus Job Retention Scheme (CJRS) grant, as part of their risk assessment and compliance activity in relation to the scheme.
This is likely to be the first stage in HMRC’s planned compliance activity and it is almost inevitable that more employers will be contacted in future – particularly given the significant number of businesses who have claimed under the scheme and the huge costs to date (approximately £35 billion).
The letters are being sent to businesses in relation to whom HMRC’s risk assessment tools suggest that:
- The CJRS grant claimed may have been too high and/or
- The conditions for receiving a CJRS grant may not have been met.
The aim of the letters is to ensure that employers review their CJRS claims and engage in a dialogue with HMRC, whether they think they have made a mistake or not.
If you receive one of these letters from HMRC you should therefore consider the following:
1. Do not put it aside for when you “have more time”
Letters from HMRC usually contain a date by which they are expecting a response – and their expectation usually involves quite a quick turn-around. In addition, if you have made a mistake, the sooner you sort it out the less negative impact it is likely to have (as shown in point 6 below).
2. Inform your professional advisers that you have received a letter
It is always sensible to keep your advisers informed of interactions with HMRC and to enlist their help with responding to enquiries.
3. Carry out a detailed check of any CJRS claims you have made, to ensure their accuracy
This check should include both the numerical accuracy of the claims and the justification for making them.
4. If you have not already done so, collate a complete set of records supporting your claims
These records should include (although this list is not exhaustive):
- financial forecasts showing the impact of coronavirus on the business
- evidence that furloughed employees would have continued in employment if the pandemic had not happened
- evidence that the appropriate amounts have been paid to furloughed workers
- evidence that furloughed employees were informed that they could not work during the period they were furloughed and that non-furloughed employees were also made aware that they could not involve furloughed colleagues in work.
5. Respond to HMRC
Always respond to an enquiry from HMRC, whether you think you have a problem or not. If HMRC have the impression they are being ignored, they will step up their enquiries into your business. In recent years they have placed increasing emphasis on their desire for taxpayers to engage with them in an effort to promote good tax compliance. This is equally applicable to enquiries over CJRS claims. Failing to respond will only make things worse.
6. Repay any overclaimed amounts – and do it quickly
HMRC have intimated that if any overpaid CJRS grant is repaid voluntarily within the appropriate time limit, the employer will not be charged a penalty for the error in their claim.
Repayment within the appropriate time limits to avoid a penalty is already a critical issue. The limit imposed by HMRC is the latest of:
- 90 days after the date you received the grant you were not entitled to
- 90 days after the date you received the grant that you were no longer entitled to keep because your circumstances changed
- 20 October 2020.
Therefore, the sooner you establish the position and make any necessary repayment the lower any penalty imposed is likely to be. HMRC is not looking to publish innocent mistakes so it’s much better for you to find any errors and tell HMRC before they knock on your door.