09 March 2023
The House of Commons Committee of Public Accounts has published its report on COVID support schemes yesterday. The report concludes; ‘the departments do not have a good enough understanding of the impacts of the £97bn of taxpayers money spent on COVID-19 support schemes.’
Commenting on the report, Susan Ball, Partner, UK Employment Tax, RSM UK said: ‘HM Revenue & Customs has had little success in recouping the £2.3 billion incorrectly paid to employers claiming furlough for employees who continued to work. HMRC must now send a clear message that it is committed to recovering fraud on these schemes through its tax compliance enquiries, and urgently increase the rate of repayments from those who overclaimed, including pursuing and penalising those who made fraudulent claims.
‘By March 2022, HMRC had only issued penalties on CJRS totalling £1.1 million, just 0.5% of the value of payments it had identified. Consequently, employers who had overclaimed furlough have little incentive to voluntarily repay grants, as they are unlikely to be penalised if identified by HMRC’s compliance teams.’
Details obtained by RSM UK in a recent Freedom of Information request to HMRC suggest that efforts to recover COVID-19 losses have stalled, with only six investigations initiated from calls to HMRC hotlines last year. Of the total calls up to 31 December 2022, less than 10% have at present led to open investigations, and no letters were issued to claimants of the Coronavirus Job Retention Scheme in 2022/23 where HMRC data highlighted an expected error.
The House of Commons Committee report shows HMRC spent £100m on additional resources to recover significant losses through fraud and error, however to date only £640,000 has been recovered. HMRC estimates indicate that between £2.0bn and £5.1bn of incorrectly claimed and fraudulent CJRS money is likely to remain unrecovered by 2023–24.
Susan Ball adds: ‘The report demonstrates HMRC is delivering a poor return on investment for taxpayers. The CJRS scheme goalposts were constantly changing in response to the pandemic, which made it challenging for employers to comply with, so understandably errors were frequent. It’s also clear HMRC is under pressure to continue to investigate CJRS claims.
‘Small to mid-sized organisations don’t have the luxury of an HMRC Customer Client Manager and therefore currently have no way to easily discuss any errors identified with HMRC, to understand HMRC’s approach to those errors, and to seek agreement on how to re-calculate what money might be owed. HMRC should have a voluntary disclosure process in place which encompasses this, along with clear guidance for claimants on corrections, including examples of errors seen and how to correct them. This could be an easy win to recover more funds as well as investigating the remaining reports to the hotline.
‘In addition, if HMRC is considering enforcing penalties for errors in CJRS going forwards, we would encourage them to deliver on the above first, and also consider a period of amnesty ahead of such action.’