Aspire's Health Check: COVID-19 – HMRC investigations are coming (Part 4)

12 June 2020


On 29 May 2020 HM Revenue and Customs (HMRC) published a consultation on draft clauses to the Finance Bill 2020 “Draft legislation: Taxation of coronavirus (COVID-19) support payments”. See our news on this here. The aim of the legislation is to ensure that grants made under the Coronavirus Job Retention Scheme (CJRS) and Self-Employed Income Support Scheme (SEISS) are within the scope of tax and included as revenue for income tax and corporation tax purposes.

This means:

  • HMRC will have additional compliance and enforcement powers to impose a 100% tax charge in relation to the CJRS and SEISS to recover payments in which recipients were not entitled.
    • For example, the 100% tax charge could be applied if an employer has not used a CJRS payment to pay employees, or pay PAYE, National Insurance Contributions or make pension contributions.
  • HMRC will be able to investigate claims under the CJRS and SEISS for up to four years after the grant was made (or longer if there was careless or deliberate behaviour).
  • Penalties could be applied against those who have considered to have deliberately defrauded HMRC.
  • Penalties could be transferred to a director of the company.

The lack of clarity in the guidance and the Direction has resulted in businesses having to make decisions based on their best interpretation, some without advisory aid. For genuine errors, businesses will need to prove that they acted reasonably and in good faith to disprove an allegation of fraud by HMRC.

We expect HMRC to undertake investigations as early as this year, following the end of the CJRS on 31 October 2020. Businesses may face assessments and penalties and, ultimately, appeals to the Tax Tribunal. As referred to in Part 3 of our Health Check campaign, Schedule 24 of the Finance Act 2007, “Penalties for Errors”, will likely be HMRC’s position of attack and enables the transfer of a liability to a company director. Penalties under Schedule 24 could be as high as 100% of the potential lost revenue – which in the case of the CJRS could be the total of all claims made, that HMRC deem should not have been.

Penalties can be reduced by disclosing your actions and genuine errors to HMRC. HMRC’s Tax Information and Impact Note, which was published alongside the consultation, sets out that a penalty will only apply if the personal fails to notify HMRC about deliberate incorrect claims within 30 days, or 30 days after the Finance Bill receives Royal Assent if it arose before that date.

To consider whether disclosure is right for you,  you should seek professional guidance to consider the steps you have taken and advice you have sought in submitting CJRS claims to date, and are still taking, to minimise error and act and demonstrate you are acting with reasonable care.

Furlough Heath-Check

Don’t let any problems escalate and consider whether disclosure is the way forward - we are offering a fixed price COVID-19 Health-Check aimed at guiding you through the process and replicating HMRC’s likely approach to a post-COVID-19 investigation.  We will detail recommendations for remedial action which may be taken to reduce potential risks where necessary.

If you would like to arrange a Health-Check please do not hesitate to give us a call on 0121 445 6178 or email


"Aspire's Health Check: COVID-19" blog series

Part 1

Part 2

Part 3