It has now been announced that, next week Chancellor Rishi Sunak will add new legislation to allow HMRC greater powers to go after those that disobeyed the rules of the Scheme – namely those that forced staff to continue working, even just in part, whilst claiming the 80% furlough payments under the Scheme.
Those new laws are expected to be quite draconian including allowing HMRC to impose a 100% tax rate on those payments which is effectively introducing a new tax band.
We have previously explained the downsides and risks associated with falsely claiming payments for employees placed on Furlough under the Coronavirus Job Retention Scheme (the "Scheme") and of course we strongly recommend against it. We also gave some other information here.
At the same time, HMRC are expected to be able to target those that have incorrectly claimed under the Self-Employment Income Support Scheme or small companies that have taken up the grant of up to £25,000 to help them get through the crisis. If HMRC suspect that those have been claimed incorrectly or, for example, a sole trader stopped trading soon after claiming the funds then they can shift the burden onto those investigated to disprove the suspicion. Failure to disprove and / or repay could also result in criminal prosecution.
The new legislation is currently making its way through the Parliamentary stages and is expected to come into law next month upon receipt of the Royal Assent from the Queen. The legislation will allow for some leeway for companies who have made mistakes on their application and they will have 30 days to report those mistakes and repay the funds without having to pay further penalties.
We previously wrote about how the Government was expected to spend £40 billion and it is now reported that indeed the Government has already spent £20 billion on supporting more than 9 million employees and 3.4 million self-employed people.
What can companies do?
Of course, we expect that most companies have correctly made their claims under the Scheme, the Self-Employment Income Support Scheme or the small companies' loan.
However, we recommend that businesses keep their documents and relevant paper trail regarding their decisions to make the relevant applications in good order, just in case they need to provide it to HMRC in due course.
A HMRC Spokesperson has confirmed that they are taking this seriously because the support to the businesses have been supported by taxpayers' money but they will not be intending to seeking out those that have made innocent or small mistakes so the penalties will only be applied to those that have abused the systems deliberately.
Our expert team remains available to support your business or any individuals through the process and assist as much as possible. Please do not hesitate to contact us for further advice and take advantage of our current offering of 30 minutes' free telephone consultation.