What to do if you have claimed too much, or not enough, from the Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme has been a lifeline for many companies seeking to keep as many staff as possible, but like all schemes, it is complex and often hard to understand. Mistakes may have been made when submitting claims and these will have to be rectified. What should companies do if they have overclaimed or underclaimed in error? rradar tax specialist Caroline Lamyman looks at the options.

Overclaims

If, when submitting an online claim, an employer makes an error that means they have received too much of the grant, then they must pay this back to HMRC.

The employer can either:

• tell HMRC as part of their next online claim and the new claim will be reduced. A record of the adjustment will need to be kept for 6 years.

• contact HMRC to pay the money back. This should only be done if the employer is not submitting another claim.

Is there a deadline to notify HMRC of the overpayment?

The employer must notify HMRC by the latest of either:

• 90 days after the date the grant was received to which they were not entitled

• 90 days after the date the grant was received if the employer’s circumstances changed and they were no longer entitled to keep it

• 20th October 2020

If the employer does not follow these procedures, HMRC may impose a penalty, but they have stated they will not be actively looking for innocent errors in their approach to compliance.

How will HMRC correct any errors if the employer does not submit another claim to correct the overpayment?

HMRC may recover the full amount of the overpaid grant by making a tax assessment for the amount to which the employer was not entitled and has not repaid. They will write to an employer if they decide to do this.

The assessment will be equal to the amount to which the employer was not entitled, including any amounts that have not been used to pay furloughed employee wages and associated costs within a reasonable period.

Payment of the amount is due 30 days after the assessment and interest will be charged on late payments. Late payment penalties may also be charged if the amount remains unpaid 31 days after the due date.

If HMRC do not make an assessment, the employer must include the relevant details of the overpaid CJRS grant, on the appropriate Corporation tax return or on their 2020/2021 Self-Assessment tax return. Further guidance will be provided in the tax return notes and help sheets.

What are the late payment penalties?

HMRC may charge a penalty if an employer does not notify them within the notification period that they are chargeable to Income Tax on an overclaimed CJRS grant.

When deciding the amount of any penalty, HMRC will consider whether the employer knew they were entitled to the CJRS grant when it was received, or knew this when it became repayable or chargeable to tax because their circumstances changed.

If the employer knew they were not entitled to the grant when it was received or knew when they had stopped being entitled to it because of a change of circumstances and did not inform HMRC within the notification period stated, then the legislation will treat this failure as ‘deliberate and concealed’. This means that a penalty of up to 100% could be charged on the amount of the CJRS grant that the employer was not entitled to receive or keep and had not repaid by the last day of the notification period.

Other factors that are typically taken into consideration when calculating a failure to notify penalty will also be considered. These are explained in HMRC’s factsheet CC/FS11.

Are there any provisions specific to companies that become insolvent?

HMRC have stated that company officers, who knew the company had overclaimed a CJRS grant at the time it was received or knew at such other time when a tax liability arose the claim was overpaid or not used for the intended purpose, can be made personally liable to pay the tax charged on their companies' overpaid CJRS grants in circumstances where the company is in insolvency and the tax cannot be recovered from the company.

What If the employer has not claimed enough?

If they have made an error in the claim that has resulted in receiving too little money, they will still need to make sure the employees are paid the correct amount. The employer should contact HMRC to amend the claim and as the claim is increasing, HMRC may need to conduct additional checks.

Before 31st July, the employer must:

• make sure to include all eligible employees on claims that they still need to make for periods up to 30th June

• make any updates they need to on claims already submitted

After 31st July, the employer will:

• no longer be able add an employee to any existing claims for periods up to 30th June, that should have been included on a claim submitted before that date

• still be able to make amendments for any other errors that resulted in them not claiming enough

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