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90 days to notify HMRC of overclaimed COVID grants

31 July: Taxpayers who have received CJRS or SEISS grants are urged to doublecheck their entitlement as the 90-day period to inform HMRC of any overclaimed amounts is now law.

Finance Act 2020 has now received Royal Assent, confirming the taxability of Coronavirus Job Retention Scheme (CJRS), Self-employment Income Support Scheme (SEISS), Coronavirus Statutory Sick Pay Rebate Scheme and coronavirus business support grants. It also provides HMRC with powers to recover grant payments to which the recipient is not entitled, as well as to charge penalties.

HMRC has published guidance on how to repay overclaimed CJRS grants and overclaimed SEISS grants, as well as factsheets on how the penalty rules apply for the CJRS and for SEISS grants.

The law is clear that the onus is on the taxpayer to notify HMRC if they have overclaimed a CJRS or SEISS grant and this must be done within 90 days of Royal Assent (so by 20 October 2020) or 90 days of receipt of the grant, whichever is the later. For payments made under CJRS, where the recipient ceases to be entitled to retain the payment then the notification deadline is the later of 90 days after ceasing to be entitled to the monies or the two dates mentioned above. 

The penalty regime is based on the usual failure-to-notify penalties with an additional provision which means that if the taxpayer knew that they were not entitled to the grant at the time when they received it (or ceased to be able to retain it), the overpayment must be notified or repayment made in full by the end of the notification period. Any failure arising from this additional provision will be treated as deliberate and concealed. Failure to notify penalties could be as much as the entire amount overclaimed.

HMRC may issue assessments to recover overclaimed grants. If that does not occur and monies were not otherwise repaid previously, then the overclaimed amount must be reported on the taxpayer’s income tax or corporation tax return and tax paid on time.

The factsheets do not mention that error penalties may apply if a taxpayer makes a mistake when putting the grant figures on their tax return, as they would for any other error on a return.

The Tax Faculty recommends that taxpayers who have claimed grants now check that they were entitled to the amount they received.

For SEISS grants the key risks affecting entitlement are:

  • the trade was not adversely affected by coronavirus;
  • the trade did not continue in the tax year 2019/20 (eg, because the business was incorporated); or
  • there was no intention to continue to trade in the tax year 2020/21.

The key risks affecting entitlement to CJRS grants are detailed in TAXguide 12/20 Coronavirus Job Retention Scheme risks and include:

  • grants not used for the purposes for which they are intended;
  • calculation errors; and
  • employees working during periods that they are on furlough.

HMRC guidance: