COMPLIANCE
HMRC’s approach to compliance
TimBridgett, employment taxes senior manager at PSTAX , discusses proposed newpowers for HMRC and the wider ramifications
P ublic bodies have had to navigate a particularly tricky path in recent months in determining whether staff may be furloughed and whether a claim under the coronavirus job retention scheme (CJRS) is appropriate. It is fair to say that government guidance has not been particularly clear in this respect. From the outset the guidance has appeared to steer public bodies away from the prospect of making a claim pointing out that if they continue to receive funding then the government would not expect them to claim. In addition to this, the guidance also points out that every effort must be made to redeploy staff and that furloughing them and making a CJRS claim is very much a last resort. However, the guidance also appeared to leave the door open to the public sector to make claims in respect of staff for whom the funding was not (primarily) derived from the taxpayer; indeed, claims have been made by local authorities on that basis e.g. leisure centres. As a further example of the government accepting claims being permissible in the public sector, the Department for Education and
Skills has issued guidance for schools confirming that the furloughing of staff is permissible in respect of jobs funded by private income streams. Therefore, based on the limited guidance available, some public bodies decided that they could legitimately furlough their staff and make a claim. On the basis that HM Revenue & Customs’ (HMRC’s) approach has been to process claims in the first instance and then check them later, public bodies are waiting to see if HMRC will be reviewing these claims retrospectively. Therefore, it is important to understand what powers HMRC has at its disposal to do that. HMRC’s guidance on CJRS has been recently updated in relation to the process it is developing to recover overclaimed grant amounts through the tax system. New measures were included in Finance Bill 2020 which, having received in July Royal Assent, will give HMRC powers in relation to the policing of CJRS grants. By the end of June 2020, some 9,400,000 employees had been placed on furlough, with the total CJRS grants of £26.5 billion paid up to that point.
With such a massive sum of money, it is inevitable that errors in grant claims, whether deliberate or accidental, have been made. HMRC’s current guidance confirms that employers that have made an error which has resulted in an overclaimed amount must notify HMRC as soon as possible and must pay back any overclaimed amount. This repayment will be done either by a reduction of later CJRS claims or a direct payment to HMRC where no further CJRS claims are planned. The new measures confirm that HMRC can use its information and inspection powers to check that a CJRS claim has not been overpaid and that a CJRS payment has properly been used to pay furloughed employee costs. We understand that HMRC will be changing some of its staff processes to accommodate these changes and that compliance personnel will be assigned to review CJRS claims. Where errors are discovered, HMRC can raise income tax assessments for employers that have received CJRS payments to which they are not entitled or where they have not used a payment to pay furloughed employee costs. Additionally, the measures give HMRC powers to charge a penalty where a person deliberately makes an incorrect claim for CJRS payment, including where
...it is inevitable that errors in grant claims, whether deliberate or accidental, have been made.
| Professional in Payroll, Pensions and Reward | September 2020 | Issue 63 32
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