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Government launches consultation on taxation of coronavirus support payments and recovery of incorrect use of funds

The government have launched a consultation for draft legislation to be included in the Finance Bill 2020.  The draft legislation will allow for the recovery of tax on payments made under the SEISS and the CJRS grant schemes, which such schemes obviously not having been included in the original draft of the 2020 Bill.  However, the draft legislation also looks to give HMRC the power to recover payments to which recipients were not entitled to under the above schemes.

In the case of the incorrect use of funds received under the Coronavirus Job Retention Scheme (also known as the ‘Furlough Scheme’), i.e. where payments have not been used to pay employees,make pension contributions, or pay PAYE or National Insurance Contributions, the Government will look to the PAYE employer, (i.e. the CJRS claimant) for reimbursement of the funds, whereas payments made under Self Employed Income Support Scheme relates to the business of the individual to whom the payment relates, and will be recoverable from the self employed individual.  We would remind employers that HMRC can retrospectively audit CJRS claims and would recommend that records under the scheme are retained for a period of five years.

Further, HMRC will also be able to charge a penalty in cases of deliberate non-compliance.

We expect more details to be available on the exact nature and powers granted to HMRC under the legislation later this month.  

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