North and north-east firms are being warned not to ignore letters from HM Revenue and Customs (HMRC) seeking clarification over their applications to the UK Government’s Coronavirus Job Retention Scheme (CJRS).
While some companies around the UK have returned cash they received for furloughed workers, many others that were eligible for help but made simple errors in the application process may be caught out in an HMRC crackdown gathering pace.
CJRS is being wound down before its end date of October 31, when it will be replaced by the recently announced Job Support Scheme, and HMRC has moved into a review phase.
It is turning its attention to making sure claims were made in accordance with its published guidance for helping firms survive through and beyond the lockdown, ramping up compliance activity and looking at some companies it suspects may have misused the scheme.
According to professional services giant KPMG, some firms around the UK have acted fraudulently, perhaps claiming cash for employees who continued to work, but many more are in danger of attracting HMRC’s attention due to simple mistakes.
Catriona Donald, a senior tax manager for KPMG in Scotland, said around 27,000 letters were being sent to businesses falling under HMRC’s “risky” profile.
Firms in the north and north-east will “certainly” be getting attention, she said.
There remains a lot of confusion among businesses about how the scheme worked, Ms Donald said, adding: “In the beginning, HMRC was keen to just get the money out.
“The scheme was brought in quickly but the rules around it changed.
“There was always a fear the scheme could potentially be used fraudulently.”
Those fears have turned out to be warranted – arrests have been made following HMRC investigations into furlough fraud.
Ms Donald said there was “a lot of unease” among Scottish businesses that may have inadvertently fallen foul of the CJRS rules, trying to keep up with at least 10 versions of the official guidance.
She added: “We are now seeing a more standard approach to compliance by HMRC, which is asking firms to confirm details of their claims.
“There are 27,000-30,000 letters going out to businesses where the revenue thinks there is an ‘at risk’ case. In some cases, they perhaps do not match PAYE returns.
“A variety of other things are being picked up on, and we would advise anyone who has received one of these letters to go back and have a look at their claims to see if they need to make any corrections.”
HMRC can charge penalties where an employer either knew they were not entitled to a grant and/or did not notify it within set deadlines.
The taxman is likely to take a “reasonable” approach to any oversights flagged up promptly but may put firms to the top of its list for “more targeted interventions” if they ignore the letters, Ms Donald said.
HMRC has a fact sheet for companies which may have received CJRS grants they were not entitled to.
The document says: “We understand that mistakes can happen, particularly in the present circumstances.
“We’ve made it as easy as possible to pay back any amounts of CJRS grants you’ve claimed that you were not entitled to.
“If you received too much because you made an error in a claim, you must pay this back to us. It’s easy to put right. You can tell us about an overclaimed amount in your next online claim without the need to call us.
“If you do not plan to make any further claims, you should let us know about the error.”
It adds: “Our priorities are supporting our customers and tackling deliberate non-compliance and criminal attacks.
“We’ll not be actively looking for innocent errors in our compliance approach. We’ll assess overclaims and charge penalties to support these priorities.”
HMRC says it will not charge a penalty if firms did not know they had overclaimed a CJRS grant at the time they received it, or when their circumstances changed, and they pay it back before January 31 2022 (sole traders/partners), or within 12 months of a company’s financial year-end.