Today, our Business Recovery director and insolvency practitioner Ben Cowgill provides a few helpful thoughts on what approach HMRC may take to those who are accused of misusing COVID-19 related government reliefs and whether you as a business owner could be at risk.
From the early noises we’ve heard in recent days, HMRC are planning to adopt an aggressive approach to company owners who they determine have utilised government reliefs in an inappropriate way.
There have been rumours that Chancellor Rishi Sunak will also look to add legislation to the upcoming Finance Bill that could give permission to HMRC to pursue any individual or business who they view as taking advantage of support payments inappropriately.
What will the penalties be?
Should HMRC believe that a business has broken furlough scheme rules, it will look to impose a 100% tax rate on any payments that have been made.
There have also been reports that for companies who fail to pay the tax demands in relation to Covid-19 payments that HMRC sees as misused, or obtained falsely or unnecessarily, HMRC will look to prosecute those companies
Additionally, HMRC may receive powers to target those who were beneficiaries of the SEIS Scheme, including small companies that received grants of £25,000 to help them survive the current crisis. If they determine a company did not actually require the loan they received, or ceased trading shortly after they received financial help, those involved must prove otherwise.
From the day that the Bill is passed, each company has 30 days to self-declare any application that was mistaken and repay those funds without receiving a penalty on that funding.
What does this mean for business owners?
For business owners who have taken on the assistance of our government without a full grasp on the strictness of the relevant guidelines, we can certainly sympathise. The present time has been a very stressful period across a variety of industries.
The addition of these penalty charges and tax implications could cause further damage to a company at an already arduous time.
There has been a reported 30% drop in insolvencies in England and Wales during March 2020 when compared against the numbers for March 2019, but for many companies the current government support could be delaying the inevitable.
The main reason for this drop appears to be compulsory liquidations falling by 80% year-on-year due to HM courts and tribunal services running at a reduced rate. Additionally, the government had suspended the use of a number of statutory demands and winding-up petitions up until June 30th of this year.
With all this in mind, we would urge those company owners affected by these announcements to get in touch with an insolvency practitioner as soon as they can in order to take a number of proactive steps. This falls within your duties as a director and helps towards the best possible outcome for your business and its staff.
How can I get more advice on my financial situation?
We can offer the services of four qualified insolvency practitioners across our Business Recovery team, each of them highly experienced and able to assess the solvency of a company and explore a variety of different financial options to find the ideal fit for the interests of stakeholders.
For any business owner looking for a no-obligation and no-cost initial chat, you can either contact us directly on firstname.lastname@example.org or call us on 0300 303 8284 and we’ll be able to explore your available options.