COMPLIANCE
following the anniversary of filing, although the extended enquiry window only applies to new or amended information. Such compliance checks may test the accuracy of the disclosures made and, where relevant, impose penalties for inaccuracies, as well as failures to notify. Although HMRC can open formal enquiries into a company’s tax return as a mechanism to check CJRS claims, nudge letters are easier for HMRC to use. We’ve seen letters which invite companies to check their CJRS claims and within 30 days, either: ● file an amended return, or ● write to HMRC to confirm that their return is correct. Although most of these requests are based on an HMRC risk assessment, there are some random enquiries as well. If these aren’t replied to, a more detailed request may be made or, in the clearest at-risk cases from HMRC’s perspective, it may go straight to a detailed review. This type of review can include requests for details on every employee for whom furlough support was claimed, and the makeup of reference pay and calculations, along with copy payslips, usually for a specific claim period / reference number (and sometimes including all subsequent claims). This is often with very short timescales in which to respond. Employers receiving these requests need to engage with HMRC. If you receive such a letter from HMRC, speak to your internal finance or tax team as the implications go much further than payroll reporting.
shown that HMRC has been supportive in extending response deadlines for employers that engage with these requests pro-actively and, where hundreds or thousands of employees are involved, reducing the information that needs to be provided by agreement. We understand these reviews are currently taking an average of six months for HMRC to complete which, considering the complexity of the rules, isn’t surprising. As CJRS overclaims fall within the tax regime, documentation relating to claims must be retained for six years. What if an employer discovers an issue with the amount of CJRS grant claimed? Employers may discover an issue with the amount of CJRS grants claimed from an internal review or an external evaluation. Where such reviews aren’t part of an existing HMRC review, employers should consider the tax return filings and the HMRC disclosure notification process, published on 20 December 2021, at http://ow.ly/MMzq30sprV0. They should notify HMRC of any errors as early as possible to minimise the scope for potentially significant penalties to be charged. Those who deal regularly with HMRC will know it generally offers more favourable treatment following voluntary disclosures of liabilities than if it has initiated enquiries or enforcement action. HMRC expects employers to resolve errors by doing their own recalculations, using the http://ow.ly/k9nY30sprVs guidance, which includes: ● the updated advice on offsetting claims ● repaying any remaining overclaimed amounts ● making any employee top-up payments that are due. What mistakes are we aware of? Many employers have made mistakes, due to the speed at which the rules were introduced and the complexity of calculations, rather than deliberately claiming for employees who weren’t on furlough. These may include errors arising from, for example: ● incorrect day counts ● including discretionary payments in reference pay ● the use of 2019/20 average pay details only, without undertaking the required
calendar look-back for variable paid employees ● the incorrect use of pre-salary sacrifice remuneration figures ● the use of fixed pay calculations for employees with significant overtime (or other variable components) even after the rule change announced on 7 August 2020 ● reductions in, or deductions from, reference salary, due to incorrect categorisation of pay components, or salary sacrifice arrangements not being factored in correctly ● claims being made in respect of furloughed directors who continued to undertake work beyond that necessary to fulfil their statutory duties under the Companies Act.
What penalties could HMRC possibly charge? Specific legislation was introduced to cover penalties for CJRS grant claim errors, which differs to that which applies for failures under pay as you earn regulations. This legislation requires the employer, in the event a CJRS claim is incorrect, to notify HMRC of its liability to income tax. In such circumstances, the notification must have been made by the latest of: ● 90 days from the date of receiving the amount relating to an excessive claim; ● 90 days from the date of a change of circumstances which led to that claim becoming excessive; or ● 20 October 2020. Where no such notification has been made, an employer may be exposed to a failure to notify penalty. In almost all instances where the notification hasn’t
HMRC is circulating letters regarding CJRS claims
If HMRC doesn’t receive a response to an informal request, and there’s no good reason for the delay, it may issue a formal information notice to obtain the information. This may increase the likelihood of CJRS penalties being charged where mistakes are discovered. These checks are there to ensure the conditions for receiving the grants have been met and employers have claimed the correct amounts. Our experience has
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| Professional in Payroll, Pensions and Reward |
Issue 83 | September 2022
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