As the Coronavirus Job Retention Scheme (CJRS) payments scheme comes to an end HMRC’s investigations of alleged fraud will increase. Media reports estimate that £3.5 Billion of payments have been made by the Government to fraudulent claims or errors.
There have already been a number of arrests made against alleged fraudsters and HMRC has issued thousands of letter to employers asking them to check their claims. HMRC do not send these letters without having considered a risk review and will think something is wrong. Not responding to such a letter is not a good option; HMRC are highly likely to undertake a detailed investigation. Any incorrect claims will be taxed at 100% to recover the full amount back plus HMRC can issue a penalty up to 100% of that tax depending on the culpable behaviour of the claimant. Or worse, HMRC can prosecute for criminal fraud which could result in a prison sentence. HMRC will also be using the thousands of complaints and “tip offs” that employees have made to them about errors or fraudulent claims. Employees may have made allegations that they were told to continue to work when furloughed or didn’t receive the correct payments.
It is not all bad news. New anti-avoidance legislation published in July provides a window to employers to correct any mistakes. If payments have been received before 22 July 2020 the employer has until 20 October 2020 to notify HMRC of the mistake without incurring a penalty. For payment received after 22 July the 90 day “amnesty” period will apply from the date of receipt.
It is therefore important to review claims and make use of this window. Even if a claim had been made knowing it was wrong it is still possible to come forward to HMRC before the deadline to reduce any penalty. Please ask us for advice if you, or your clients, need help.