Financial support packages offered by the government to protect businesses during the Covid-19 crisis are set to be investigated by HMRC due to the abuse of the schemes.
The schemes include the Furlough, Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), Bounce Back Loan Scheme (BBLS) and the Self-employed Income Support Scheme (SEISS).It was revealed in September 2020 that around £3.5bn in furlough payments may have been made in error or claimed fraudulently.
Due to this, the government granted businesses an ‘amnesty’ enabling them to return any undeserving payments by 20 October 2020. During this time, the HMRC fraud hotline were taking up to 10,000 calls a day.
HMRC intend to target any businesses that have abused the schemes during this time and will be increasing investigations of payments made via the support schemes over the upcoming months.
HMRC has the power to investigate and claim back support payments which should not have been paid. They will recover these amounts by way of a tax charge. This is regardless of whether claims were submitted deliberately or in error.Companies that have claimed amounts that they are not entitled to, will impose a tax liability of the full amount. In addition, they could also received a penalty for failing to notify HMRC of the error. This can be up to 100% of the claim amount, doubling the original claim.
The Finance Act 2020 gives HMRC the power to investigate directors or companies that have become insolvent or where insolvency is likely if they have received support payments that they were not entitled to. Directors will be held personally liable under in respect of payments that they were not entitled to which results in a formal insolvency procedure.
It is unclear if HMRC can still impose personal liability on directors where a company is placed into a formal insolvency process before a liability order has been made against the company.
There is also a risk of criminal sanctions against directors as well as the personal liability. Action can be taken to have directors disqualified . This would prevent an individual from being a director of a company in any way for the period specified by the court, which can be up to 15 years.
It is unknown at present how the HMRC intend to utilise these powers which is extremely worrying for directors.
The deadline of 20 October 2020 has now passed but if you are a company director and are concerned about whether you were entitles to claims made, you should still come forward. Those who do come forward will still be liable to pay a penalty, but the amount may be reduced.
If you are concerned about any of the above, please contact us for a chat today on 0161 723 3211.