How to get Covid-19 self-employed support scheme claims right

  • Identify recent changes to the government's support schemes
  • Explain HMRC's approach to investigating grant and loan applications
  • Explain how applicants should engage with HMRC
How to get Covid-19 self-employed support scheme claims right
Credit: Vlada Karpovich/Pexels

With the introduction of lockdown 2.0 the Job Support Scheme has been dropped and the Coronavirus Job Retention Scheme (CJRS) brought back.

Employees on furlough will be able to receive up to 80 per cent of the normal salary where they are not working for the business.

The Self-Employment Income Support Scheme has been enhanced and extended so that two further grants can be claimed for November to January 2021 and February to April 2021.

Businesses found to have incorrectly claimed payments will be subject to a 100 per cent tax charge.

Stamping out fraud

HMRC has also announced that it is now checking claims for the Eat Out to Help Out scheme using its compliance teams. 

Mis-claiming has been suspected with these various schemes in the past, and HMRC has acknowledged that fraud may affect 5 per cent-10 per cent of the claims.

These fraudulent claims are estimated to be worth between £1.75bn and £3.5bn.  

In response, there have been arrests and over 3,000 businesses have received letters from HMRC checking that their claims are valid.

Whistle-blowers have been active too: HMRC has received more than 8,000 calls to its fraud hotline reporting suspect businesses.

It is perhaps inevitable that in view of widespread public concern at reported fraudulent claims, HMRC will leave no stone unturned in its search for impropriety or false claims. 

Businesses of all types and industries should be on their mettle. HMRC and other agencies are watching. 

New legislation came into force in July 2020 which means businesses found at fault face penalties of up to 100 per cent of their erroneous claim. 

But the possibility of innocence is allowed: HMRC says that where a genuine mistake was made it will not penalise the business. 

Nonetheless, businesses that receive a notice from HMRC that their claims are to be checked must ensure they take some simple steps to avoid the elephant traps. 

Firstly, it is worth confirming whether the compliance check is covered by fee protection insurance; businesses should inform their adviser or insurers and confirm that any advisory costs will be met. 

If the business under investigation is not insured against tax enquiries, it is still wise to get professional advice and minimise the risks. 

Potential pitfalls

Miscommunicating something to HMRC can cause difficulties down the line for the unwary or the naïve. 

Second, ensuring information is presented in an organised format and meets agreed deadlines, can be key to limiting the disruption of a compliance check. 

Most businesses want to cooperate - but at what cost?

Where is the line drawn on how much information is provided, or access given to key personnel?

One common problem arises when HMRC is either given unlimited access to personnel or given leave to speak to people who may not know how the claims were prepared or who at most have limited knowledge - and they then provide the HMRC officer with the wrong information.