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Quarterly news:

Autumn 2023

Covid support payments still on HMRC’s radar

One widget or two? With support schemes having lost between £3.3 billion and £7.3 billion to error and fraud, HMRC isn’t letting go now.

It’s still checking that claims under schemes like the Coronavirus Job Retention Scheme (CJRS or furlough scheme), met all necessary conditions.

Any employers who used the furlough scheme, and have yet to review details of their claim, are advised to make time to do so. If this brings any errors or uncertainties to light, it is best to contact HMRC at once. Repayment of any money received in error will be needed, but it is just as important that HMRC is formally notified that support has been overclaimed.

Where errors are disclosed voluntarily (rather than at HMRC prompting), and HMRC is satisfied as to the full cooperation of the taxpayer, it can reduce the amount of any penalty it may seek to charge.

Cases over eligibility to Covid support are already starting to come before the Tax Tribunal, and they make useful reminders of the key points to check. One area where HMRC has picked up many errors is around eligibility in the first phase of the furlough scheme, when employees were not permitted to do any work at all for their employer.

This was the area where one small business, which ran parent and baby groups, children’s events and after-school clubs, was held by the Tribunal to have fallen the wrong side of the rules. The company relied heavily on generating interest via social media posts: and the question was whether the fact that a director/employee posted on the business Facebook account while she was on furlough, meant she was ‘working’. Because if it did, it made the furlough claim invalid.

Although the Tribunal voiced considerable sympathy for the business, it pointed out that its job is to look at the facts of a case, and apply the law to the facts involved. It has ‘no jurisdiction to consider the fairness of the legislation or of HMRC’s behaviour’.

In this case, though the number of social media posts fell off dramatically during the period in question, the Tribunal held to the letter of the rules.

And in its own words, the rules were ‘all or nothing… An employee who was turning out 100 widgets a day would still be working if they only turned out three widgets a day.’ The verdict was in HMRC’s favour and meant that the business had to repay furlough monies of nearly £9,500.

The case is a reminder of the complexity of the furlough rules, and the possibility of quite unintentional error. For help reviewing past claims, or concerns about pandemic support received, do please contact us.

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