On 22nd July, the Finance Bill received Royal Assent, which triggered the start of the 90 day period for businesses to notify HMRC that they received furlough scheme payments which they were not entitled to receive or retain.

‘For claim payments received prior to 22 July 2020, the 90 day period concludes on 20 October, and after this it will be “gloves off” for HMRC to check up on any claim made and pursue incorrect claimants using both criminal and civil powers’, said Richard Morley, partner in tax dispute resolution at BDO.

Morley added: ‘This applies to both employers using the Coronavirus Job Retention Scheme (CJRS) or furlough scheme, and the self-employed who applied under the Self-Employment Income Support Scheme (SEISS), as well as those who received other direct support grants in error.

‘Given that HMRC has clearly started to actively follow up on tip-off’s and potentially incorrect claims, including recent arrests, businesses and individuals should start reviewing their furlough claims now.

‘For business owners, many of whom may have implemented claims in a rush at the start of lockdown, check and double-check the amounts are right. Making sure the paperwork is accurate and government guidelines are adhered to is key.

‘For those where HMRC suspects fraud, we can expect more in-depth investigations into not just the furlough/ SEISS claims but also the wider business and personal affairs of the individuals involved. The legislation includes powers to pursue company office holders where businesses become insolvent, with joint and several liability.’

An employer who does not notify HMRC within the 90 day 'amnesty' period, but who knew at the time that the income tax first became chargeable that it was not entitled to a CJRS grant, will be liable to a penalty on the basis that the wrongdoing was deliberate and concealed. There is a minimum penalty of 30% of the grant improperly claimed, and a maximum of 100%.

Morley added: ‘As well as following up whistle-blower reports, we expect HMRC to use its “Connect” computer system to flag anomalies in claims, while looking at industry and sector norms. Anyone needing to make a disclosure of an incorrect claim should seek specialist professional advice without delay.’

This was an entirely new scheme and many employers were coping with the most difficult circumstances they’d ever faced. HMRC can appreciate that mistakes happen, particularly in these circumstances, including claiming too much.

The tax office will not seek out innocent errors and small mistakes for compliance action. They will act, however, against anyone who deliberately sets out to defraud the system or claims money they aren’t entitled to.