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HMRC seeks compliance and enforcement powers for coronavirus support schemes

04 June 2020

The government is consulting on draft legislation to ensure that coronavirus business support grants are subject to tax, and to give HM Revenue & Customs new powers to ensure fair play by preventing non-compliance and abuse of the relevant schemes.

Over the past few months, the government has launched several schemes to help support individuals and businesses with the Covid-19 pandemic, including the Coronavirus Job Retention Scheme (CJRS) and the Self-Employment Income Support Scheme (SEISS).

The government is now consulting on draft legislation which aims to ensure that all coronavirus support grants received by employers and any SEISS grant received by businesses or an individual partner of a partnership (if the grant is retained by the individual) are taxable income – irrespective of when they are paid - and so subject to either corporation tax or income tax. 

In addition, the draft legislation proposes to give HM Revenue & Customs (HMRC) new powers to ensure that the support schemes are administered properly and protected from fraudulent claims. These include powers for HMRC:

  • To use its information and inspection powers to check: that a CJRS or SEISS claim has not been overpaid; and that a grant under the furlough scheme has been used to pay employee wages and/or the associated PAYE, NICs and pension contributions costs within a reasonable period.
  • To impose an income tax charge on persons who receive a grant to which they are not fully entitled and/or improperly use a CJRS grant. This charge will be 100% of the amount of the grant that has been incorrectly claimed or used, less any amount already repaid.
  • To charge a penalty in cases of deliberate non-compliance.
  • To make culpable directors of insolvent companies jointly and severally liable for the income-tax charge, in relation to any support grant to which the company was not entitled or any CJRS grant which was never intended to be used to pay employee costs, PAYE, NICs and pension contributions.

HMRC has previously made it clear that it intends to retrospectively audit every aspect of these support schemes. The proposals in this consultation will ensure that its audit powers have the necessary teeth. The consultation closes on 12 June 2020.

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