Mid-market businesses should prepare for a flood of letters from HM Revenue & Customs as furlough draws to a close and the government looks to recoup a suspected £7 billion of fraudulent or erroneous Coronavirus Job Retention Scheme claims.
That is the warning from business advice specialists at Grant Thornton. It says that HMRC is moving through the gears now that its Taxpayer Protection Taskforce is up to strength, following a recruitment drive to hire more than 1,200 investigators since March.
The department is understood to be conducting around 30,000 checks as it shifts from a stance of focusing on compliance and support to one of stricter enforcement. Some business are set to receive a Code of Practice 9 letter inviting them to enter a Contractual Disclosure Facility. “This lets the recipient know they are suspected of deliberate fraud and offers them protection from criminal prosecution on the proviso they come completely clean, disclose any tax errors over the last two decades and repay the amount owed,” said Grant Thornton partner and tax disputes expert David Francis.
More than one million businesses have used the CJRS during the pandemic. However, the government estimates that up to ten per cent may have been claimed incorrectly, with fraud suspected to make up a significant proportion.The CJRS legislation says that any inaccuracy can be treated as deliberate and concealed.
Mr Francis, a former tax inspector, said: “HMRC has been embattled on two fronts: supporting businesses to deal with both Brexit and the pandemic. It is fair to say the department has put that ahead of enforcement activity due to a lack resource. But that stance is set to change as it comes under pressure to recoup a suspected £7 billion fraudulently or erroneously claimed under the CJRS.”
Businesses accepting the Contractual Disclosure Facility will have to concede that any fraudulent claim was deliberate. An attempt to put it down to a genuine mistake will invalidate the COP9 protection and leave those involved open to criminal prosecution. Sectors such as retail, leisure and hospitality are expected to be a major focus for HMRC.r.
Mr Francis said: “Businesses may have made honest mistakes during the incredibly challenging trading conditions posed by the pandemic but HMRC’s view is likely to be that there will have been at least three instances to get things right: the initial claim, replying to the nudge reminder letters and again when completing a corporate tax return. It is important to enlist the right professional advice and respond within the 60-day deadline.”
