Self-employed individuals and employers have until 20th October to inform HMRC that they’ve over-claimed the Self Employed Income Support Scheme (SEISS) or Coronavirus Job Retention Scheme (CJRS) grants and repay any excess before penalties apply.

As we’ve mentioned before, it was always likely that some people would abuse them, and that HMRC would investigate claims. Arrests have already been made where fraud has been detected, and these are likely to increase.

CJRS (Furlough Scheme) repayments.

Any incorrect CJRS grant claims where an overclaim has been made can be corrected in a later CJRS claim. If the employer has submitted their final CJRS claim you can repay HMRC online.

If you’ve under-claimed the CJRS grant, the extra amount of grant due needs to be set-up directly by HMRC; don’t adjust the amount claimed in a later claim. You will need to contact HMRC for them to do this.

A CJRS grant should be repaid to HMRC if the funds were not used within a reasonable period to reimburse the employer’s costs relating to furloughed employees, such as furloughed wages, employer’s class 1 NIC and employer’s contribution to a workplace pension.

SEISS repayments.

The self-employed income support scheme (SEISS) has always lagged behind the furlough grant scheme (CJRS), and, as advised earlier, applications for the second SEISS grants will open on 17th August. The calculation will be on the same basis as the first claim.

The SEISS grant is calculated by HMRC, so the only opportunity for an overclaim is if HMRC has made an error.

The HMRC guidance says it will work out if the trader is eligible for a SEISS grant and contact them to invite them the trader to apply. However, HMRC can’t check the three current-period conditions for the SEISS grant:

• Whether the trade has been adversely affected by the coronavirus pandemic
• If the individual traded in 2019/20 (if the tax return for that year hasn’t been submitted)
• Whether the trader intends to continue to trade in 2020/21

If any of those conditions don’t apply, the SEISS grant has been incorrectly claimed. In this situation, the tax payer needs to tell HMRC as soon as possible and repay the overpaid amount. Disclosure must be made using the same government gateway user ID and password that was used to claim the original SEISS grant.

Notification period

When the draft legislation was proposed for taxing the coronavirus support payments (SEISS, CJRS and SSP reclaims), it included a 30-day period for taxpayers to notify HMRC of corrections needed to any of those claims. This notification period was then extended to 90 days.

If the taxpayer notifies HMRC by the 90th day after the claim was submitted,  no penalty will be imposed.

This gives taxpayers until 20th October 2020 to declare any overclaims of SEISS, CJRS or SSP.

Penalties

If the taxpayer does not repay HMRC the amount of coronavirus support payment overclaimed, HMRC will raise an assessment of tax equal to the overclaim. This assessment can be appealed.

Where the taxpayer fails to notify HMRC of the overclaimed coronavirus support payment within the 90-day period HMRC will impose a penalty under the ‘failure to notify’ rules. The penalty is calculated at 30% to 100% of the overclaimed amount, for an unprompted disclosure, but will be set at 50% to 100% of the overclaimed amount for a prompted disclosure.

A taxpayer who is investigated by HMRC and is found to have incorrectly claimed a CJRS or SEISS grant will therefore have to repay 150% to 200% of those funds.

The majority of over-claims will have arisen through genuine errors. The guidance has been complex, and issued at a time when business owners were under extreme pressure. We would hope that HMRC will therefore show some understanding when implementing these penalties, but until they start to feed through the system, we can’t be sure whether that will be the case.

If you’re worried about your claims, you have until the 20th October to review those that you’ve made. If you’d like our help in doing so, please get in touch.