Employers and self-employed people now have 90 days to repay coronavirus grants if they have been over-paid. HMRC have announced that they must be informed within a 90 day period if businesses have over-claimed furlough payments through the CJRS. Self-employed individuals have the same time-period to report any overpaid grants through SEISS.
The excess payments must also be paid back or penalties will apply.
CJRS Overpayments – Furlough Scheme
A CJRS grant should be repaid to HMRC if the funds were not used to reimburse the employer’s costs related to furloughed employees within a reasonable period of time. The grant should have been used to pay furloughed employees wages, employer’s class 1 NIC and employer’s contributions to workplace pensions.
Any incorrect coronavirus grants paid via the CJRS (furlough) scheme can be corrected in a later CJRS claim. However, if an employer has submitted a final CJRS claim it is possible to pay back any monies to HMRC.
To do this you will need your 14 or 15 digit payment reference number that begins with X.
In order to get your payment reference number, you will need to contact HMRC.
Once you are in possession of your payment reference you can make your payment via Faster Payments, CHAPS or Bacs to HMRC’s account.
Faster Payments (online or telephone banking) usually reach HMRC on the same or next day, including weekends and bank holidays.
CHAPS usually reach HMRC the same working day if you pay within your bank’s processing times.
Bacs usually takes 3 working days.
Your payment may be delayed if you use the wrong reference number.
You can find out more about CJRS overpayments here.
If an employer has made an error in a CJRS claim that has resulted in them receiving too little money there are two things to note.
- The employer must make sure that they pay their employees the correct amount regardless of the amount they have claimed.
- Employers should contact HMRC to amend their claim and submit the correct figures. The employer shouldn’t adjust a later CJRS claim to account for the underpayment. Extra amounts of the grant which are due must be set-up by HMRC directly.
SEISS Repayments (first grant)
The SEISS grant is calculated by HMRC (not by the claimer), so it is only possible for a valid claim to be overpaid if HMRC has made an error.
However, the conditions of the first SEISS grant were ‘self-verified’ by the claimant at the point of application, therefore HMRC didn’t check the three current-period conditions for the SEISS grant
To be eligible for the SEISS grant the HMRC guidance criteria is:
- 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 are not met by an individual who received the SEISS grant then the grant has been incorrectly claimed. Therefore, the trader must tell HMRC as soon as possible and repay the overpaid amount.
This guidance applies to the first SEISS grant. Applications for the second SEISS grant will open on 17 August.
All communications regarding the SEISS grant must be made by the claimant directly using the same government gateway user ID and password that was used to claim the original SEISS grant. We cannot tell HMRC about overclaimed grants on behalf of our clients.
Time Period For Notification Of Overpayment
Originally there was a 30-day period for taxpayers to notify HMRC of corrections which needed to be made on any claims for coronavirus grants. This was then extended to 90 days after lobbying from financial institutions.
The taxpayer must notify HMRC of any overclaims of SEISS, CJRS or SSP by the 90th day after their claim was submitted. (For claims submitted before 22 July 2020, the notification must be by the 90th day after FA 2020 was passed)
If these time periods are adhered to then no penalties will be imposed. Therefore, taxpayers have until the 20th of October 2020 to report any overpayments without incurring penalties.
If a taxpayer does not repay HMRC the amount of payments which they have overclaimed, HMRC will recover the full amount of the overpaid grant by making a tax assessment. Payment of the amount assessed is then due within 30 days and interest will be charged on late payments. HMRC may also charge late payment penalties if the repayments are unpaid 31 days after the due date.
Failure to notify HMRC of an overclaimed coronavirus grant within the 90-day notification period will result in a penalty under the failure to notify rules.
Harsher Penalties for Undisclosed Overpayments
The penalty is calculated at between 30% to 100% of the overclaimed amount, for an unprompted disclosure, where the taxpayer has made HMRC aware of the overpayment.
However, the penalty for a prompted disclosure where the taxpayer has not made HMRC aware of the overpayment is set at 50% to 100% of the overclaimed amount.
This means that a taxpayer who is both investigated by HMRC and found to have incorrectly claimed a CJRS or SEISS grant will be required to repay between 150% and 200% of the coronavirus grants which they received.
HMRC Tax Investigations
If you are worried about the possibility of a tax investigation into your business following a CJRS or SEISS claim you must act now. A tax investigation can be very time consuming and costly whether any fault is found or not.
Our tax investigation insurance will cover the administration costs of a tax investigation by HMRC including any investigations into CJRS or SEISS claims.
We are currently offering 14 months of tax investigation insurance for the price of 12 at only £125.95.
Please get in touch with our friendly staff to enquire about tax investigation protection.
You can read more about HMRC tax investigations here… HMRC Tax Investigations And COVID-19