PAYROLL
The senior accounting officer (SAO) regime obligations These require companies to appoint an SAO, who must take reasonable steps to ensure the company establishes and maintains appropriate tax accounting arrangements. They must also submit an annual declaration to certify whether the company had appropriate tax accounting arrangements in place throughout its financial year. HMRC generally expects to see appropriate documentation setting out the procedures and processes in place, and a penalty regime operates for failure to comply with the SAO requirements. The business’s obligations to prevent the facilitation of tax evasion This is by individuals working for, or on behalf of, the business under the so-called corporate criminal offence in the Criminal Finances Act 2017 – HMRC seeks to understand what risk assessment has been performed and the steps implemented to mitigate any relevant risks. HMRC will also want to understand the internal controls a business has in place to manage employer tax compliance and if, and how, they have been tested, whether internally by the business or by a third party. In other words, it’s no use having a sound control framework on paper – you also must demonstrate that it’s effective in practice. As before the introduction of the updated BRR+ process, there are clear advantages associated with low-risk status which include fewer HMRC interventions. Nudge letters Many businesses (and individuals) now receive letters from HMRC that fall outside the formal enquiry process, requesting detailed information about things such as the employment status of contractors or compliance with NMW. This nudge approach makes recipients aware of potential problems, often providing the chance to correct errors without the expense and stress of
more in-depth enquiries. It also enables ‘innocent’ taxpayers to confirm that all of their tax affairs are in order. However, care should be taken when replying to these letters. First, you should consider the status of the information request – unless HMRC raises a formal enquiry, statutory rights aren’t engaged, so informal requests can allow HMRC to bypass taxpayer rights when asking questions. Second, you should take account of your responsibilities to third parties – if an engager provides HMRC with detailed information about a contractor, does it risk breaching general data protection regulation rules? Unless, or until, HMRC changes its approach, recipients of nudge letters need to consider carefully how to respond. The best approach is to use the letter to think about whether there is a problem, and to respond, either by making a suitable full disclosure outlining the applicable circumstances using one of HMRC’s formal disclosure processes, or by confirming that, to the best of the organisation’s knowledge and belief, no action is required. Finally, it goes without saying that if in doubt, take advice before doing anything at all. It’s no use having a sound control framework on paper – you also must demonstrate that it’s effective in practice CJRS reviews The CJRS provided grants to employers so they could retain and continue to pay staff during pandemic lockdowns and restrictions, by furloughing employees at up to 80% of their wages. 11.7 million employees were furloughed through the scheme, at a cost of £70 billion. HMRC expenditure aimed at recouping
money lost to CJRS fraud and error was increased in the March 2021 budget, with its new taxpayer protection taskforce. This brought with it an investment of £100 million and 1,250 staff members, representing one of the largest responses to a fraud risk by HMRC. As of November 2021, HMRC had received approximately £408 million returned by claimants who, unprompted, found errors in their claims, and over £719 million was returned by claimants who were entitled to grants but decided, for a range of reasons, to repay them. HMRC stated in late 2021 that the government expects to recoup £2.3 billion of CJRS grant money in the following months, and it’s clear HMRC expects employers to review their claims to ensure they’re correct, with any overclaimed CJRS grant amounts returned or reported as taxable on their tax returns. HMRC also considers that CJRS compliance falls within the SAO regime. CJRS claims should therefore be considered when deciding whether SAO certification should be qualified or unqualified, noting that failures to meet the SAO obligations can potentially lead to personal liabilities for the SAO. Employers may have received a CJRS compliance letter from HMRC, which sets a deadline for them to take certain actions. While most of these requests are based on an HMRC risk assessment, there may be some random enquiries as well. They’re largely desk-based reviews with HMRC requesting information that’s provided digitally. These reviews can typically include requests for: ● details on every employee for whom furlough support was claimed ● the makeup of reference pay and the calculations, along with copy payslips, usually for a specific claim period / reference number (and sometimes including all subsequent claims). Typically, only short timescales are provided for responses to be supplied. Employers receiving these detailed requests need to engage with HMRC. If HMRC doesn’t receive a timely response to these requests, and there’s no good reason for the delay, it may issue a formal information notice to obtain the information that was requested. This attracts penalties and may increase the likelihood of CJRS penalties being
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| Professional in Payroll, Pensions and Reward |
Issue 82 | July - August 2022
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