HMRC Disputes

Background

To boost to the struggling hospitality sector, the Government offered a 50% contribution of up to £10 per diner on all food and non-alcoholic drink sales between 3 and 31 August 2020.  The discount value was applied by eligible businesses directly to customer bills, and claimed back from the Government within the terms of the Scheme.

In all, businesses made claims for around 161m meals served, to a total value of around £850m.

Given the nature and hurried introduction of the scheme, claims were made through a very simple “self-assessment” process and were paid by the Government on a “pay now check later” basis.

Inevitably, this resulted in a number of errors being made within claims, for example,

• Claimants being ineligible to claim under the scheme but making a claim anyway.
• Claimants being eligible to claim but claiming more relief than correctly due.
• Not errors, but claimants deliberately providing inaccurate or incorrect information to make fictitious or overstated claims.

HMRC allowed 90 days for businesses to repay any incorrectly claimed amounts; those not doing so but being found out by HMRC then being liable to repay all incorrectly claimed amounts, with interest, and also being liable to a penalty of up to 100% of the incorrectly claimed amount, or even face prosecution.

It is not known how many businesses notified HMRC of incorrect claims, or how many have subsequently been investigated by HMRC. However, a number of prosecutions were commenced in December in relation to business proprietors who had deliberately made incorrect claims, and more are likely to follow.

What should my clients do now?

HMRC has already issued “nudge letters” to over 4,000 businesses that it is concerned may have made incorrect claims, several of which have resulted from “tip-offs” from third parties and disgruntled staff members who have “whistle blown” to HMRC.

However, this initial action by HMRC is likely to be only the tip of the iceberg, and a “risk review” of the claims made by clients who took advantage of the scheme might be helpful to obtain comfort that those claims are correct.

Inevitably those who respond to HMRC’s “nudge letters” or voluntarily disclose errors to HMRC will benefit from greatly reduced penalties compared to those who wait for HMRC to make their own investigations.

Conclusion

In view of the number and value of claims made, HMRC is likely to review a  sizeable number of these very carefully.

As a team of ex-HMRC investigators, with cumulatively over 100 years’ experience of dealing with serious HMRC investigations at all levels, we know what HMRC will be looking for and the approach they will adopt, and the best way of dealing them.

Using this specialist knowledge and experience we can help your clients to;

• Deal robustly with any HMRC investigations that have already started;
• Respond appropriately to any HMRC “nudge letters” received;
• “Risk review” claims made to ensure accuracy; and
• Assist with the disclosure of any irregularities to HMRC to minimise penalties and avoid the risk of prosecution.