Covid-19 related fraud is reportedly on the rise, with employers putting pressure on employees to continue to work when on furlough or businesses obtaining rates grants when not meeting the relevant conditions. HMRC is seeking to regulate its powers to deter deliberately incorrect claims through penalties and recover funds through self-assessment.
It is expected that the scope of policing powers to recover wrongly claimed grants may be extended through to local authorities, to gradually cover all of the Covid-19 support grant schemes in time.
Finance Act 2020 Schedule 16 (regulation 9) gives powers to HMRC to make an assessment for coronavirus support payment to which the person is not entitled. On CJRS and SEISS schemes the Act will:
give HMRC powers to raise an income tax assessment on anyone who has received a SEISS or CJRS payment to which they are not entitled, or anyone who has not used a CJRS payment to pay furloughed employee costs. The assessment is equal to the amount to which they are not entitled, or which they have not used to pay furloughed employee costs
reaffirm HMRC’s inspection powers to check that the SEISS or CJRS grant has not been overpaid and that a CJRS payment has been used for its intended purpose
give HMRC powers to charge a penalty, where:
a person deliberately makes an incorrect claim for a SEISS or CJRS
a person who has claimed a CJRS payment deliberately does not use it for the costs it was intended to reimburse.
give HMRC powers to make a company officer jointly and severally liable for the income tax charge raised in relation to any CJRS payment to which the company was not entitled or which was never intended to be used to pay the furloughed employee, in cases where
the officer is found culpable of making a deliberate CJRS claim to which the company was not entitled, and
HMRC can demonstrate that there is a serious risk that the company will be unable pay the income tax assessment
Penalties for failed notification
Penalties will only apply if the person fails to notify HMRC about the situation within the prescribed notification period.
‘The notification period’ was the period commencing on the day on which the income tax became chargeable and ending on the later of:
(a) the 90th day after the day on which this Act is passed, or
(b) the 90th day after the day on which the income tax became chargeable.
What should members do?
With the budget deficit set to reach an all-time high, it is expected that the recovery of overpaid grants will be high on HMRC’s agenda, as indicated by the much publicised recent arrests to seize evidence of CJRS fraud.
It will now be particularly important for practitioners and the wider ACCA member community to ensure the correct understanding of the whistleblowing process as well as the obligations imposed on members by the Professional Conduct in Relation to Taxation (PCRT) and AML reporting obligations when suspicions of incorrect client claims are identified.