Legislation will soon be in place to allow HMRC to claim back Covid-19 bailouts such as the job retention scheme (JRS) and self-employed income support scheme (SEISS) from businesses and individuals who HMRC believe did not deserve the bailout or broke the rules on their use. If HMRC are successful in their pursuits then the individual or company will face 100% tax and could even face criminal prosecution if they do not pay.
With the JRS, HMRC are concerned companies have been asking employees to continue to work despite taking the 80% furlough payments from the tax payer. Working is not allowed whilst on furlough, until the flexible furlough scheme became active on July 1st, so a 100% tax rate on those payments will be imposed if HMRC can prove their case. Working is defined as making money for the employer or providing services to them or any of their linked companies so it is difficult to see how the majority of tasks would not fall within one of those categories. Accountancy Today reports that 2,000+ employers have already been reported to the whistleblowing hotline for furlough fraud.
Businesses should keep detailed records of their decisions as to why they believed they were entitled to JRS and that the employees would still have been employed should the pandemic not have happened. One success story has come from The Spectator magazine where the Covid-19 impact to their business was not as bad as first feared and as such have ended their furlough scheme and are returning their funding to the tax payer.
For SEISS HMRC will be investigating whether the sole traders ceased trading soon after receiving the money from the tax payer and the onus will be on the sole trader to prove otherwise.
Once the legislation is passed any individuals or businesses will have 30 days to self-declare a mistaken application for Covid-19 support and pay the money back without penalty.
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