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Clock is ticking to repay coronavirus grants

Self-employed individuals, and employers, have 90 days to inform HMRC that they have over-claimed the SEISS or CJRS grants and repay any excess before penalties apply. 

28th Jul 2020
Tax Writer Taxwriter Ltd
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Repayment
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Any incorrect CJRS grant claims in which the employer has overclaimed the amount due can be corrected in a later CJRS claim. If the employer has submitted their final CJRS claim there is a facility to repay HMRC online which has been in place since 26 June.

If the employer has under-claimed the CJRS grant, the extra amount of grant due needs to be set-up directly by HMRC, and the employer should not adjust the amount claimed in a later CJRS claim. 

A CJRS grant should be repaid to HMRC if the funds were not used within a reasonable period to reimburse the employer’s costs relating to furloughed employees, such as furloughed wages, employer’s class 1 NIC and employer’s contribution to a workplace pension.

SEISS repayments

The self-employed income support scheme (SEISS) has always lagged behind the furlough grant scheme (CJRS), and the applications for the second SEISS grants will open on 17 August.    

The SEISS grant is calculated by HMRC, so a valid claim can only be marginally overpaid if HMRC has made an error.

The HMRC guidance says it will work out if the trader is eligible for a SEISS grant and contact them to invite them the trader to apply. However, HMRC can’t check the three current-period conditions for the SEISS grant:

  • Whether the trade has been adversely affected by the coronavirus pandemic
  • If the individual traded in 2019/20 (if the tax return for that year hasn’t been submitted)
  • Whether the trader intends to continue to trade in 2020/21

If any of those conditions are not met the SEISS grant has been incorrectly claimed, the trader needs to tell HMRC as soon as possible and repay the overpaid amount.

You can’t tell HMRC about the overclaimed grant on behalf of your client, as the disclosure must be made using the same government gateway user ID and password that was used to claim the original SEISS grant.

Notification period

When the draft legislation was proposed for taxing the coronavirus support payments (SEISS, CJRS and SSP reclaims), it included a 30-day period for taxpayers to notify HMRC of corrections needed to any of those claims. After significantly lobbying by the professional bodies, this notification period was extended to 90 days (FA 2020, Sch 16, para 12).

If the taxpayer notifies HMRC by the 90th day after the claim was submitted, or for claims submitted before 22 July 2020, by the 90th day after FA 2020 was passed, no penalty will be imposed. This gives taxpayers until 20 October 2020 to come clean about any overclaims of SEISS, CJRS or SSP.

Penalties

If the taxpayer does not repay HMRC the amount of coronavirus support payment overclaimed, HMRC will raise an assessment of tax equals the overclaim (FA 2020, Sch 16 para 8). This assessment can be appealed.

Where the taxpayer fails to notify HMRC of the overclaimed coronavirus support payment within the 90-day period HMRC will impose a penalty under the failure to notify rules. The penalty is calculated at 30% to 100% of the overclaimed amount, for an unprompted disclosure, but will be set at 50% to 100% of the overclaimed amount for a prompted disclosure.

Thus, a taxpayer who is investigated by HMRC and is found to have incorrectly claimed a CJRS or SEISS grant will be required to repay 150% to 200% of those funds.    

Replies (6)

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By AWeb72
28th Jul 2020 20:52

I reported one for CJRS for a client a month ago, and still awaiting the callback! (No further claims needed so can't adjust)

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By paulwakefield1
29th Jul 2020 09:25

Since any failure to repay results in the overpayment being recovered by a tax assessment, does this mean the original receipt remains taxable as I assume the assessment is not tax allowable? If so, and couple that with a failure to notify penalty, it could be quite eye watering!

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Replying to paulwakefield1:
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By Paul Crowley
29th Jul 2020 09:47

That would appear to be the case. Need legislative change to correct. Was this the intension of Parliament? Latter sentance generally used to punish, not relieve.

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By Jeh1
29th Jul 2020 13:27

If a client already refunded the SEISS money - exact sum - into his Self Assessement account as there were no HMRC details for refunding at that time, how can he get the refund transferred from his Self Assessment account and into HMRC SES Refunds dedicated bank account?

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By unclejoe
29th Jul 2020 23:00

Some people have complicated self-employments, and are also on low incomes. How do you determine whether your trade has been affected by COVID, and if so how much? How can you be sure that HMRC would determine this the same way? What happens if you have an intention to continue to trade, but end up not actually doing so. How will HMRC assess that intention?
Consider this scenario. A has income from three sources. She is a musician and plays in a band, she is a qualified carer for the disabled and elderly, and from time to time she does odd days casual work in a warehouse. The band have had no bookings since March, and there is no prospect of bookings for the foreseeable future. Other band members have said that they are not sure if they want the band to continue. A has no other musician work, but would gladly join another band if the opportunity arises – does this count as continuing?. She does care work on a part-time employed basis, but also has one client that she looks after one night a week as relief for the family as self-employed. In march the family have decided to reduce the number of people giving grandma care because of COVID and it now seems likely that when the situation is safe grandma will go to a care home, so this is unlikely to resume. The warehouse work was sporadic and unlikely to resume for the foreseeable future as they have already furloughed full-time staff. And there are rumours that the warehouse may permanently close.
A has correctly and honestly accounted for tax on all her income, but has not had income above the personal allowance threshold. She claimed and was awarded nearly £1,000 SEISS which was a lifeline. She is dyspraxic and finds record keeping and personal organisation a challenge, so records are basic. She struggles with her finances and regularly uses foodbanks and raids supermarket skips late at night for food. She has not read this article, but if she did and realised that HMRC may come demanding the £1,000 back with another £1,000 penalty I think it would tip her over the edge.
Accountants won’t see people like this. Those on the edge can’t afford accountants services. But they exist and are suffering. Thank you.

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By AndrewV12
04th Aug 2020 11:56

Mmmm when we all look back at the furlough grants in 5 years time, would they be seen as over generous, about right or under generous, I suppose the question is what state would the country be in if they had been created and paid out. I have a feeling certain individuals who ticked all the boxes have made a million pounds plus, did they need that much money for businesses which potentially were going no where.

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