Penalties for misuse of the job retention scheme

Figures released by HMRC show that it had received 6,749 reports about fraudulent claims under the Coronavirus Job Retention Scheme (“CJRS”). On 28 July HMRC published two new guidance documents to address these issues.

HMRC has issued guidance where employers have either claimed too much or too little under  CJRS. It provides the process and time limits under which employers must report the overpayment without becoming liable for a penalty. If an employer has claimed too much under the scheme, they should make HMRC aware of this when they file for their next claim and the grant they receive will be reduced to reflect the overpayment. However, if the employer is not intending to claim under the scheme again, they should contact HMRC to agree repayment terms. In order to avoid liability for a penalty, employers should alert HMRC to the overpayment on the latest of either:

• 90 days after the grant was provided
• 90 days after the date that you received the grant which you were no longer eligible for due to a change in circumstances
• 20 October 2020

HMRC has published a factsheet which relates to the recovery and penalties of overclaiming under CJRS. HMRC may make a tax assessment to determine whether an employer has claimed too much via the scheme. If they deem that you have, they will write to you informing you of the outcome of the tax assessment and will seek to recover payment within 30 days. Interest and penalties may be charged for late payment.

Where employers fail to notify HMRC of any overpayment, penalties may be imposed of up to 100% of the overpayment where the employer’s failure was deliberate and concealed. These measures are in accordance with the Finance Act 2020, which came into force on 22 July 2020. Company officers and partners may also be jointly and severally liable in relation to the amount of income tax due and the penalties.

Employers should also be aware that there are potential criminal sanctions for abuse of the scheme. After investigating suspected tax fraud, HMRC will make a charging recommendation to the Crown Prosecution Service who will decide whether criminal charges should be made against the taxpayer.

Nonetheless, the guidance makes it clear that HMRC’s priority is to address deliberate non-compliance and criminal attacks and that they are not going to be actively looking for innocent errors in an employer’s compliance approach.