New draft legislation published by the government about the recovery of payments made under the various coronavirus support schemes from those who were not actually entitled to claim prompted a statement from HMRC.
That statement was not – as one might have hoped – a conciliatory one like the previous ones about allowing non-domiciled residents trapped by the lockdown a pass on their status, or self-employed people turning in tax returns late. It suggested no sort of common-sense approach to be applied in the aftermath of the single biggest societal upheaval of the twenty-first century.
Instead, HMRC spoke only of the penalties it will look to hand out to anyone found to have claimed erroneously. Last time it was an unprompted warning to retired GPs and other staff summoned to the front lines of the NHS once again that they would face harsh punitive action should they engage in any tax avoidance schemes with reference to their employment.
Recently the government laid down draft legislation about the recovery of payments made under Coronavirus Support Schemes, including the Self-Employment Income Support Scheme and the Coronavirus Job Retention Scheme to which the claimant was not entitled.
So far, so normal – in a system that was thrown together that quickly and that widely, and full of the usual sorts of bureaucratic mazes and complexities associated with HMRC, mistakes were and are inevitable. However, HMRC then elected to stick in their own oar, reminding taxpayers that they would be subject to penalties in cases of what it termed ‘deliberate non-compliance’.
By way of further elucidation, HMRC stated that – for example - directors would be held jointly and severally liable in such cases, on the assumption ‘each partner is taken to know anything that any of the other partners knows.’
Given the aforementioned complexity of the claims process and the widespread and well-publicised confusion from both small and large businesses as to how to claim, whether they qualified and so on, it seems manifestly unfair to simply assume foul play where error may be a more feasible explanation.
Having assessed the proposals, and HMRC’s statement, it is clear that although aimed at fraudulent claims, they also stand to ‘catch out’ those who have misunderstood and claimed in error. In the worst-case scenario, as observed by Tim Stovold, head of tax at Moore Kingston Smith to the FT Adviser, these new powers could ‘make a director liable to repay an amount they never benefited from personally in the first place.’
Once again, it would appear HMRC is failing to ‘read the room’. At a time when businesses will be working hard to help the nation’s economy get back to its feet - and dealing with the complexities required to do so - it seems counter-productive at best for HMRC to adopt this threatening manner and give them something else to worry about.
With social distancing and new regulations about workspace, safety and more, do small businesses really need to be looking over their shoulder as well?
David Hannah is founder and principal consultant of Cornerstone Tax