This Institute regularly engages with HMRC on matters of interest to our members. Below is set out some key messages from recent meetings.

Virtual Communications Group

This group meets each month. At the most recent meeting on Monday 16 November various matters of interest were discussed including several in respect of the COVID-19 supports in addition to some important guidance and updates on HMRC’s compliance work in this area:-

• HMRC are seeking to resolve the issue which prevents anyone with an Irish passport who cannot otherwise verify their identity from setting up a government gateway ID – this has been a lobbying matter for this Institute in recent months;
• Updated guidance on the COVID supports will in future examine what happens if a business takes the opportunity to refresh/refurbish its premises etc. when closed;
• An update was received from the Making Tax Digital team giving more information on when HMRC moves all businesses from the VAT mainframe onto a different system starting in April 2021; and
• A letter is being sent to mid-sized businesses in the construction sector inviting feedback on ways HMRC can provide support.

Responses have also been received as follows to a number of COVID support scheme compliance queries:-

“What happens on compliance? For example, if claimants have received a grant and they have ceased trading?

Anyone not entitled to a grant should notify HMRC as soon as possible to avoid a penalty. You should also pay back any grant amounts that you are not entitled to. More information is available on gov.uk: https://www.gov.uk/guidance/tell-hmrc-and-pay-the-self-employment-income-support-scheme-grant-back.

HMRC has begun post-payment compliance checks to recover money paid out with the focus on those who claimed despite having ceased trading. More information is available on gov.uk: https://www.gov.uk/government/publications/tell-hmrc-if-youve-stopped-trading-and-review-your-eligibility-for-the-self-employment-income-support-scheme.

Anyone receiving an email from HMRC had until 20 November to avoid a penalty.

Around 100,000 people were contacted about claiming SEISS who had told us on previously filed tax returns that they had stopped trading. We provided them with information about SEISS, including the eligibility criteria, in case they had restarted trading but had not needed to notify us yet. We did not want to exclude anyone from the opportunity of applying for the grant.

We have recognised in our approach the need to get money to people ASAP and therefore invitations to claim were made to this group, along with details of eligibility criteria so customers could make a declaration as to whether they were eligible. We always intended to conduct follow up compliance activity for the scheme.

Can agents be informed of how much SEISS has been paid out to a client so they can put it on their clients’ tax return?

SEISS grants need to be returned as taxable income on 2020/21 tax returns due to be filed by 31 January 2022. HMRC will publicise this nearer the time. Clients should inform their agents (who complete their SA return for them) that they’ve received a SEISS grant, just like they do for the rest of their trading income.

How will HMRC ensure people include SEISS grants on their returns?

Specific boxes will be included on 2020/21 tax returns for claimants to return information on their SEISS grants. HMRC are working with their IT partners to identify how the SEISS grant amounts can be pre-populated. All return boxes include guidance, and this is available via pop-up prompts when returns are completed online.

HMRC will publicise the need to include SEISS grants on 2020/21 tax returns nearer the filing date of 31 January 2022.

Anyone not including these grants in the relevant return may have the SEISS amounts corrected or could face an enquiry or penalty for filing an incorrect return.

What penalties will my client get if they didn’t know when they claimed they’d made a mistake, HMRC send a letter prompting them, and then they act to put it right after the deadline for notifying but before the repayment deadlines?

• If notification of liability to the income tax charge is made to HMRC before the end of the notification period, there is no penalty;
• If someone notifies after the end of the notification period, then a Failure To Notify (FTN) Penalty is applicable. These FTN penalties are the same FTN penalties that have applied since the regime was introduced by Sch 41, FA 2009, with the following exceptions:
• Where the claimant received a CJRS / SEISS / EOTHO payment knowing they weren’t entitled at that time, then the failure is treated as being deliberate and concealed, and the deliberate and concealed penalty scale will be applicable;
• For CJRS this “treated as deliberate and concealed” also applies to payments where the claimant knowingly has not used the monies to pay the costs intended (e.g. to pay their staff) within a reasonable period of time.
• This “treated as deliberate and concealed” is a new measure introduced by the Finance Act 2020, sch 16, para 13;
• There is no reasonable excuse for deliberate behaviour in relation to FTN penalties – this has always been the case since introduction of the FTN penalty regime in 2009;
• Where the claimant made a genuine error, and did not know at the time, then their behaviour is non-deliberate, with the usual penalty scales detailed in FS11 applying;
• Reasonable excuse can apply to non-deliberate FTN which would reduce the penalty to nil;
• An unprompted disclosure of a non-deliberate FTN, notified within 12 months of the tax being due, and full reduction for quality of disclosure would result in a nil penalty; and
• For non-deliberate failures, if the related income tax charge is paid before the due date, then the Potential Lost Revenue will be nil, and therefore the penalty amount will be nil.

So ample opportunity to reduce the penalty amount to nil if the failure is non-deliberate in nature.

Will HMRC issue an assessment with the payment reference number? What drives the assessment? Is this something HMRC will issue automatically, or just if someone who has notified has not paid within 30 days? Or is the assessment mechanism for when HMRC spot an error that has not been notified to them?

Everyone who has claimed CJRS/ SEISS / EOTHO has a responsibility to ensure their claims are accurate and repay any money they were not entitled to. No one who has tried to do the right thing has any need to be concerned, as long as they work with us to put it right [see CJRS repayment pages] – HMRC offers claimants the opportunity to declare errors and repay overclaims. By virtue of Paragraph 9, Schedule 16 of FA 2020 powers HMRC can recover amounts incorrectly claimed and not repaid by issuing an assessment, including amounts notified and not repaid within 30 days and where HMRC identify an error that has not been notified.”

Representative Body Steering Group

• A query was raised in respect of delayed processing of paper CGT returns. HMRC has now confirmed that anyone affected will be given additional time to pay and won’t suffer because of a delay in processing their returns. As of Friday 9 November, there were 1,845 cases on hand, the oldest being 78 days old. There is a small amount of resources available each day to work through these cases. HMRC is to provide an estimate of how long the backlog will take to clear;
• The deferral of self-assessment payments on account was also discussed. The relevant HMRC team is keen to make it clear that only those adversely affected should benefit from deferral. Comms will be sent out to ensure that taxpayers and agents are aware that they need to deal with deferrals and TTP arrangements in good time for January – deferral guidance was updated last month; and
• At the request of this Institute, a “temperature check” will be taken in the December 2020 meeting in respect of the 2019/20 self-assessment deadline. This Institute continues to lobby for automatic suspension of 2019/20 late filing penalties for a period of three months.