In August, diners rushed back to restaurants hungry to make the most of the Chancellor’s flagship Summer Statement Eat Out to Help Out (EOHO) scheme. The Monday-to-Wednesday initiative was hailed a success by the hospitality sector, which had been starved of trade during the first nationwide lockdown.
But a letter sent from HMRC to EOHO claimants suggests that some restaurants may have bitten off more than what went through the till and overclaimed.
Businesses that repay the overclaimed EOHO grant within the notification period will not incur a penalty - which gives claimants 90 days after they’ve received the EOHO payment.
There is a likelihood that some of these businesses may not have survived the time since the end of the scheme. HMRC cannot recover tax from insolvent businesses but the company officers will instead become liable to pay the tax charged EOHO overpayments.
Meanwhile, partners in partnerships will be jointly and severally liable for the tax assessed to recover EOHO payment. If the partnership does not repay the overclaimed EOHO payment, one of the partners would have to include the income tax charge on their tax return for 2020/21, and the other partners would not have to self-assess the amount.
Recovering the funds
HMRC will make a tax assessment to recover the full amount of the overclaimed payment and assess the amounts the businesses were not entitled to under the EOHO rules.
Claimants that don’t pay the amount within 30 days of the assessment will incur a penalty. The claimants that knew they were overclaiming and did not tell HMRC within 90 days of receiveing the payment, will be treated as if they deliberately concealed that income.
HMRC acknowledged that mistakes can happen “in the present circumstances” and will take action to put these incorrect claims right. However, its main priority is deliberate non-compliance and criminal attacks.
These businesses will feel the force of HMRC’s penalty system and will be charged up to 100% on the amount of the EOHO payment.
“We’ll not be actively looking for innocent errors in our compliance approach. We’ll assess overclaims and charge penalties to support these priorities,” said HMRC in the accompanying EOHO factsheet.
Much like how the application process which blocked agents’ involvement due to time constraints in designing the scheme, tax agents won’t be able to repay this on behalf of their clients.
The clawback of overclaimed EOHO reflects HMRC’s recent movement to clamp down on the misuse of the coronavirus support. HMRC recently sent similar overtures to self employed income support scheme (SEISS) claimants that have stopped trading.