HM Revenue & Customs (HMRC) have written to more than 3,000 employers they believe may need to repay some or all of their Coronavirus Job Retention Scheme (CJRS) grant and have reminded them that there is a 90 day period of grace after the claim was made to voluntary make repayments. The problem is that claims made in April are already outside this period and claims made in May soon will be.
Companies need to act right now if they have received a letter and respond to HMRC even if they think that their claim is correct or there has simply been a mistake.
Failing to do so will mean that HMRC will instigate an investigation that could take months to resolve. HMRC are normally sympathetic if they get a response but if not, they will crack down hard.
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.
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. It is always sensible to keep your advisers informed of interactions with HMRC and to enlist their help with responding to enquiries.
Companies need to carry out a detailed check of any CJRS claims they have made, to ensure their accuracy. This check should include both the numerical accuracy of the claims and the justification for making them.
Companies should also collate a complete set of records supporting their claims. These records should include, 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 and 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.
It is essential that companies always respond to an enquiry from HMRC, whether they think they have a problem or not. If HMRC have the impression they are being ignored, they will step up their enquiries into a 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.
If businesses have overclaimed then repay any overclaimed amounts 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 90 days after the date of the claim. That time limit has therefore already expired for April claims and will very shortly expire for claims made in respect of May. Therefore, the sooner you establish the position and make any necessary repayment the lower any penalty imposed is likely to be.
HMRC’s current investigation is probably only the tip of the iceberg and it is inevitable that 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).