- Made in error, for example, through a misunderstanding of the Coronavirus Direction, or mis-calculated as to the level of grant which could be claimed
- The employer was not entitled to make any claims under the terms of the Scheme
Given the complexity of the Scheme, it is not unsurprising that errors may have been made in calculating the level of grant due. Furthermore, HMRC guidance was being continuously updated during the early stages of the Scheme. However, we are hearing stories about fraudulent claims and inappropriate practices being adopted by the employer, including:
- Claiming payments for employees who undertook work whilst on furlough
- Furloughing staff but asking them to work ‘voluntarily’ on an unpaid basis, or engaging them on a ‘self-employed’ basis
- Claiming furlough payments for ‘ghost’ employees and/or employees who left employment before 19 March 2020
- Not paying furloughed staff the full amount that they are entitled to under the Scheme
- Failing to account for PAYE tax and National Insurance on the payments received via the Scheme
On 28 July, HMRC published two guidance notes: ‘overclaims’ guidance and ‘penalties’ guidance as they relate to overclaimed grants paid to employers through the Scheme.
Where an employer has identified an overclaim following the submission of a claim, this can be deleted online but only within 72 hours of the claim being submitted.
Where a claim has been processed by HMRC, the following options for resolving any overclaim include:
- Telling HMRC as part of the next online claim submitted, thereby reducing the amount to be reclaimed
- Contacting HMRC to repay the excess claim. This should only be done where a subsequent claim is not being made.
Where an employer has overclaimed grant receipts under the Scheme which it has not repaid, it must notify HMRC by the latest of:
- 90 days after the date the employer received the grant to which they were not entitled to
- 90 days after the date the employer received the grant to which they were not entitled to keep because of a change in circumstances
- 20 October 2020
HMRC may seek to recover an overpaid grant by issuing a tax assessment for the amount the employer was not entitled to and has not subsequently repaid.
Late payment interest
The employer will be required to pay the amount due within 30 days of the issue of the assessment. HMRC will also be able to charge interest on the late payment of the over reclaim included in the assessment, and also seek a late payment penalty where payment remains outstanding for 31 days after the due date.
Where the employer does not notify HMRC of any overclaim, penalties will also be due.
HMRC may impose a penalty of up to 100% of the overclaim, in particular, where the employer fails to notify HMRC. In determining the amount of penalty due, HMRC will consider whether that failure was ‘deliberate and concealed’, which will be the case where the employer knew it was not entitled to the grant, knew it had stopped being entitled to it and did not notify HMRC of the overclaim within the notification period.
HMRC has confirmed that it will not charge a penalty if the employer did not know it had been overpaid at the time it was received, or at the time that circumstances changed, and if the employer repaid the overclaimed amount during the relevant time period being: for companies, 12 months from the end of the accounting period and for sole traders and partnerships, 31 January 2022.
Personal liabilities of the company officer
The legislation also includes provisions where company officers may also be personally liable to pay the tax charged on their company’s overpaid grants under the Scheme. The provisions will apply where the officer has deliberately made a claim to which the company was not entitled, or if the company is in insolvency and tax cannot be recovered from the company.
Name and shame
HMRC will publish a ‘name and shame’ list providing details or deliberate defaulters which will have a reputational risk for the employer.
Over 11,000 employers have been contacted by HMRC concerning potential irregularities with the claims made. If you have received a letter or have concerns about the claims submitted to HMRC, then a review of the claims submitted will be a sensible course of action to take.
If you wish to discuss the matter further, please contact Nick Bustin, Director of Employment Tax, on 07515 795 186 or via email firstname.lastname@example.org.