Inappropriate use of covid-19 related government reliefs
What approach will HMRC take and are you as a business owner at risk? Here Cowgills Business Recovery director and insolvency practitioner Ben Cowgill provides his thoughts.
If the early noises we are hearing are anything to go by, HMRC plan to take an aggressive approach to business owners who they deem to have used government reliefs inappropriately.
It has been rumoured that Chancellor Rishi Sunak will seek to add legislation to the upcoming Finance Bill that will enable HMRC to pursue individuals and businesses who they see as inappropriately taking advantage of support payments.
What will the penalties be?
If HMRC believes that a company has broken the rules of the furlough scheme, it will impose a 100% tax rate on the payments made. It is also reported it will use its powers to prosecute businesses that fail to pay tax demands from Covid-19 payments that it believes were misused, obtained incorrectly or not necessary.
HMRC may also be handed powers to target beneficiaries of the SEIS Scheme and small companies that received £25k grants to help them through the crisis. If a business did not actually require a loan, or ceased trading soon after receiving financial assistance, it will require those investigated to prove otherwise.
Once the Bill has been passed, businesses will have 30 days to self-declare a mistaken application and repay without imposing a penalty.
What does this mean for business owners?
Many business owners may have taken the assistance from the government without understanding the strict guidelines and rules in place. Understandably it’s been a highly stressful time for many industries, and, the introduction of these tax and penalty charges could be enough to cause further damage to an already volatile market.
While the insolvency service has reported a 30% drop in insolvencies in England and Wales in March 2020 compared with March 2019, it is widely thought that this is the calm before the storm. The drop was driven by a decrease in compulsory liquidations which fell by 80% year on year as HM courts and tribunal services reduced operational running. In addition to this the government announced the prohibition of the use of statutory demands and certain winding-up petitions until June 30th, 2020.
We encourage business owners who may be affected by this, to speak with an insolvency practitioner at the very earliest opportunity to ensure they are taking proactive steps. This is in line with their duties as a director and to ensure the best possible outcome for the business and its employees.
Our Business Recovery team includes four qualified insolvency practitioners, with a wealth of expertise, who can assess the solvency of a business and consider a range of options to best protect the interests of all stakeholders.
If you would like to speak to someone for a no obligation, no cost chat please do not hesitate to contact Ben directly firstname.lastname@example.org.
The information was correct at time of publishing but may now be out of date.