Tax professionals have welcomed the U.K. government’s agreement to extend to 90 days the time allowed for businesses to correct errors made in claims for coronavirus support payments.
The change gives businesses a more realistic time period in which to check claims and notify HM Revenue & Customs of any corrections, Dawn Register, tax partner at BDO, said in a June 25 release.
Legislation to be added to the current finance bill was the subject of a short technical consultation launched on May 29. It will impose a 100 percent tax charge on payments to which a claimant was not entitled and penalties for deliberate noncompliance.
Responding to the consultation, the Chartered Institute of Taxation had suggested that the 30-day time limit initially proposed seemed appropriate in cases of deliberate error. But claimants' inadvertent errors “may only come to light as their familiarity with the scheme grows, or during a review carried out by their adviser, or [during] a later inspection by HMRC,” the CIOT argued.
The proposed new clauses, included in a June 26 update on the Parliament website, provide for a notification period beginning with the day on which the income tax became chargeable, and ending on the later of 90 days after the finance bill becomes law or 90 days after the day on which the income tax became chargeable.
The extended time limit will apply to coronavirus support payments, including grants under the coronavirus job retention scheme (CJRS) and the self-employment income support scheme.
Members of Parliament will debate the finance bill at its report stage and third reading in the House of Commons on July 1 and 2.
“Given the huge volume of government guidance and changes in July already, we consider the extension to a 3-month period is crucial to allow businesses time to review claims and seek professional advice where necessary,” Register said. “We expect there will be many cases where innocent mistakes are made given the difficult trading conditions for businesses during lockdown.”
Register noted that HMRC is receiving whistleblower reports of cases in which abuse of COVID-19 support is suspected. “We expect HMRC enquiries and serious investigations will follow the 90-day correction window for those who fail to rectify any incorrect claims,” she added.
HM Treasury published on June 25 explanatory notes and tax information and impact notes relating to the proposed new finance bill clauses regarding the economic impact of COVID-19. As well as dealing with the taxation of coronavirus support payments, the new clauses would secure pension benefits for retired people who have returned to work to support the coronavirus response; modify the statutory residence test; and protect existing enterprise investment scheme and seed enterprise investment scheme tax reliefs for an investor who also supports the company using a Future Fund convertible loan note. There are also measures relating to interest on unpaid tax, stamp duty land tax, and a road user levy for heavy goods vehicles.
Flexible Furlough
HMRC has reminded employers that they will soon be able to “flexibly furlough” eligible employees under the CJRS. “From July 1, you can claim a more flexible grant for any employee you have previously received a CJRS grant for, and who now returns to work on reduced hours. You can also continue to claim for employees who stay fully furloughed,” HMRC said in a June 26 email.
Employers must claim CJRS grants by July 31 for periods ending on or before June 30, HMRC said. They will also need to “agree [on] the hours and shift patterns that you want your employees to work from July 1, [and] pay your employees' wages for the time they’re in work and apply for a job retention scheme grant to cover the remainder of their usual hours for which they are still furloughed.”
HMRC noted that some employers have been in touch to say that they have claimed too much. “You will be asked when making your claim whether you need to adjust the amount to take account of a previous error. Your new claim amount will be reduced to reflect this. You do not need to take any other action but should keep a record of this adjustment for six years. If you’ve made an error in a previous claim but do not plan to submit further claims, you need to contact us to let us know, so that we can tell you how to repay the money,” HMRC wrote.
HMRC also updated on June 26 its published guidance on the CJRS, and it published a new guidance note on “how to pay all or some of your grant back.”
Treasury Direction
HM Treasury published on June 26 a further direction under the Coronavirus Act 2020 to reflect the extension of the CJRS to October 31 and changes to the terms of the scheme from July 1. The direction modifies two earlier directions setting out the legal framework for the scheme.
Part 1 of the schedule to the direction modifies the scheme as originally set out for the March-June period. A CJRS claim must not be made for a time after June 30 and must not be made after July 31, according to the direction.
Part 2 of the schedule provides for a CJRS claim to be made by a qualifying employer (as defined), for an employee who is a “flexibly furloughed employee,” in a claim period between July and October.