Eat Out To Help Out over-payment or fraud
The UK government’s Eat Out to Help Out Scheme was one of the highlights of the summer for businesses, offering much-needed crucial support to businesses to stay afloat during difficult times brought on by the Covid-19 crisis.
However, HMRC has announced it will be reviewing and potentially investigating claims made by as many as 4,000 businesses.
If your business gets investigated by HMRC in relation to Eat Out to Help Out we have the experience and knowledge in business tax and litigation to support you and potentially mitigate any problems or errors.
I provide legal assistance around business tax relief and any claims you’re entitled to during the ongoing coronavirus pandemic
What to do if your business receives a letter from HMRC?
Claimants have 30 days to respond to the letter before HMRC may start a formal compliance check.
Companies are being asked to review their financial records to ensure they not only met the correct criteria for eligibility but that they also only claimed for what they were entitled to.
Correcting Eat Out to Help Out errors
If you were unaware at the time that you had claimed too much and act quickly, you may be able to avoid incurring any additional charges or penalties by repaying overpaid the money within the allotted period.
Sole traders or partners must return money by 31 January 2022. For companies, this period ends 12 months from the end of their accounting period.
If you find an error you should inform HMRC within 90 days of receiving the money wrongly claimed.
How HMRC will recover overpayments
HMRC will make a tax assessment to recover the full amount of an overclaimed payment.
Any amount assessed by HMRC must be paid within 30 days of notification with interest charged on late payments and penalties possible. If HMRC believes a business tried to conceal this incorrect claim, then a penalty of up to 100% on the amount of the Eat Out to Help Out payment may be made.
If no assessment has been made by HMRC this does not mean you do not have to refund HMRC. The details of the over claimed monies must be reported to HMRC via the tax return or by written notification.
Partnerships
HMRC will look to collect an overclaimed Eat Out to Help Out payment made to a partnership as income tax. It may assess any of the partners.
The partners will then be liable for the amount assessed. If the partnership does not repay the amount and no assessment has been issued, then one of the partners must include the Income Tax charge on their self-assessment tax return for 2020 to 2021. Other partners will not need to self-assess this amount.
Insolvent companies
Directors may become liable for any overpayment if the business becomes insolvent and taxes cannot be reclaimed.
This can happen if the director knew:
the claim was not used for the intended purposes; or
the company had over claimed an Eat Out to Help Out payment at the time of receipt
HMRC’s approach so far
Any businesses charged a penalty for deliberately placing an incorrect claim could see their details published on a list of defaulters and be criminally sanctioned by HMRC.
Those penalised for incorrect payments will be contacted by HMRC with details of how the decision was made. Businesses looking to appeal must do so within 30 days from the date the notification was written.
In addition to significant legal consequences, being investigated can be very bad for business reputation. As an example, Papa John’s pizza chain has recently had some unhelpful press in relation to allegations that 1 of it’s franchisees made significant inappropriate claims under the Eat out to Help Out Scheme.
In summary, HMRC is now getting tough on companies which may have submitted fraudulent claims and/or kept poor records when claiming financial support during the pandemic.
