HM Revenue & Customs (HMRC) has set out full details of the penalties that will apply to employers and self-employed individuals who are found to have breached the rules of the Coronavirus Job Retention Scheme (CJRS) and Self-Employment Income Support Scheme (SEISS).
A factsheet published by HMRC confirms that employers that have over claimed CJRS grants and have not made a repayment should notify HMRC by the latest of:
- 90 days after receiving the grant they were not entitled to;
- 90 days after a change of circumstances that meant they could not retain a grant; or
- 20 October 2020.
HMRC says that employers that were not aware they had been overpaid when they received the grant or when circumstances changed will not be charged a penalty. However, they will need to repay the amount overpaid.
Where HMRC finds that an employer has received an overpayment, it will carry out an assessment of an Income Tax charge to recover the overpayment. This will be equal to the amount overpaid, or not used within a reasonable period to make furlough payments to employees or to cover associated costs. The charge must be repaid within 30 days, after which interest and penalties will apply.
If an overpayment has been received, but HMRC has not made an assessment, employers must detail the overpayment on their Corporation Tax return or Self-Assessment tax return.
Where a company has received an overpayment and the company officers knew of an over claimed CJRS grant when it was received, or another time when a tax liability arose, or they were aware that the grant was not used for its intended purpose, and the repayment cannot be recovered from the company because of insolvency, company officers can be made personally liable for the amount owed.
If an employer fails to notify HMRC within the relevant period, a penalty of up to 100 per cent of the CJRS grant they received but were not entitled to and which they do not repay by the last day of the notification period, will be charged. This means employers could have to pay more than twice the amount of an overpayment in these circumstances.
Deliberate defaulters could also have their details published under the Publishing Details of Deliberate Defaulters (PDDD) policy.
Specific arrangements apply to partnerships. Partners will be held jointly and severally liable for the overpayment. If HMRC does not issue an assessment, one of the partners will need to include the charge on their 2020-21 Self-Assessment Tax Return.
Meanwhile, HMRC has published a separate factsheet detailing penalty arrangements for the SEISS.
Self-employed individuals in receipt of an overpayment or a grant they were not entitled to must notify HMRC by the later of:
- 20 October 2020; or
- 90 days after receiving the grant.
As with CJRS overpayments, HMRC will issue tax assessments for overpayments that have not been repaid. These will need to be paid within 30 days to avoid interest and penalties being applied.
Self-employed individuals who are concerned about making a payment can contact HMRC’s Payment Support Service on 0300 200 3835.
Where an overpayment has been repaid, it does not need to be included on a 2020-21 Self-Assessment Tax Return. However, self-employed individuals who have received an overpayment but do not receive a tax assessment should include it on their 2020-21 Self-Assessment Tax Return.
If a self-employed individual does not notify HMRC of an overpayment within the notification period, they will be charged a penalty, based on the overpaid amount owing on the last day of the notification period.
Penalties will only apply to self-employed individuals who were not eligible for the grant and were unaware that this was the case if they do not repay the grant by 31 January 2022.
Furthermore, specific arrangements apply to partners and partnerships in receipt of overpayments or grants they were not entitled to, with partners held jointly and severally liable for overpayments or claims they were not eligible for that were subsequently paid into the partnership.
Where a self-employed individual or partner does not agree with HMRC’s assessment, it is open to them to appeal against the decision, through a process set out in the guidance.