HMRC has published a new compliance factsheet which explains what steps it will take to recover furlough payments that have been wrongly claimed, when it will impose penalties and publish the names of 'deliberate defrauders'.
HMRC accepts that 'mistakes happen' and says that it isn't looking for 'innocent errors'. Instead, it is going to focus on those organisations that have deliberately not complied with the scheme and have made fraudulent claims.
However, it expects all organisations who have been overpaid to contact them and repay what they owe.
How to notify HMRC that you've been overpaid
If you are still claiming furlough grants, you can notify HMRC when you submit your next claim about errors. Otherwise, you have to notify them within a certain amount of time to avoid incurring penalties.
The time limits are the latest of:
- 90 days after you receive the furlough grant you’re not entitled to
- 90 days after the day circumstances changed so that you were no longer entitled to keep the furough grant
- 20 October 2020
Income tax charges
HMRC can recover overpayments by making a tax assessment. The assessment is equal to the amount you've overclaimed including any amounts that you have not used to pay furloughed employee wages and associated costs.
Payment is due 30 days after the assessment and interest is charged on late payments. It can also charge late payment penalties if the amount remains unpaid 31 days after the due date.
If you don't notify HMRC on time, you may have to pay a penalty in addition to repaying the debt. HMRC will consider whether you knew you were entitled to the furlough grant when you received it, or you knew when it became repayable or chargeable to tax because your circumstances changed.
If you knew you were not entitled to your grant when you received it, or knew when you had stopped being entitled to it, and didn’t tell HMRC in the notification period then the law treats your failure as deliberate and concealed. This means a penalty of up to 100% could be charged on what you owe.
Name and shaming
If HMRC believe that you acted deliberately and concealed what you have done, it may treat you as a 'deliberate defaulter' and could publish your name, address and other information about you here. Information about the circumstances in which HMRC names and shames defaulters is available in this factsheet.
Our Coronavirus updates
We're working hard to keep you up to date with legal developments around Coronavirus. We've set up a portal which includes lots of helpful articles and advice to help you.
If you have a query, that we haven't answered, please contact us.