New legislation allows HM Revenue & Customs (HMRC) to recover Coronavirus Job Retention Scheme (CJRS) grants that have been overclaimed.
Those who fall foul of the legislation could face interest charges, financial penalties and even be named and shamed.
If a business overclaimed a CJRS grant and has not repaid it, it needs to inform the tax authority within 90 days.
The new legislation allows looking for incorrect claims, but the authority says by paying back anything owed, any tax liability can be avoided.
However, firms may be penalised if they did not notify HMRC within the notification period that they were chargeable to income tax on an overclaimed CJRS grant.
If a penalty is applied, there are factors taken into consideration which include:
- When the CJRS grants were received;
- When it became repayable; or
- When it became chargeable to tax because circumstances changed.
The authority can then charge a penalty of up to 100 per cent of the amount the business was not entitled to receive.
If the business was aware it was not entitled to a grant and did not disclose that within the notification period, the law says that the failure was deliberate and concealed and substantial penalties could apply.
When determining the amount involved, HMRC will make a tax assessment of the amount the business was not entitled to and have yet to repay.
Penalties and interest payments
The outstanding amount identified by the assessment must be paid within 30 days or any late charge will incur interest.
A further penalty may also apply if the bill has not been settled by 31 days after the due date.
What happens with a partnership?
If a partnership receives an overclaimed CJRS grant that it does not repay, HMRC may assess any of the partners for income tax who will be jointly and severally liable for the amount assessed.
What happens with insolvent businesses?
If a company is insolvent and HMRC cannot recover the tax it owes, company officers can become personally liable to pay the tax charged on their company’s overclaimed CJRS grants.
Naming and shaming defaulters
HMRC says that if a deliberate penalty is imposed it may publish details of the defaulter.