Shona Campbell

Navigating through the pandemic has been a stressful time for business owners who have juggled staff welfare, rising costs, supply chain issues and other commercial pressures to survive. Covid help schemes have been lifeline for many but given the speed at which the schemes had to be brought forward, some businesses have received grants they were not entitled to. Now, at a time when trading levels and cashflow may still be under pressure, the taxman wants that money back.

Shona Campbell, Henderson Loggie’s business recovery and insolvency partner, revealed that the treasury is writing off £4.3 billion of COVID help scheme cash. This means that HMRC expects to recover only £1 in every £4 of funds owed due to claimant errors or fraud. However, she added that just because HMRC is under pressure to recover all the taxpayers’ money distributed during the pandemic, it doesn’t mean they are not actively pursuing it.

Ms Campbell said: “For businesses aware that they may have made a mistake in claiming grants, it can seem like the easy thing to wait and see what happens. However, being proactive and taking control could head off more stressful times ahead. Claimants who have received money they were not entitled to cannot afford to stick their heads in the sand and hope the problem goes away.

“HMRC will agree affordable repayment plans for businesses struggling to meet their obligations, and early engagement with them will be beneficial. Although enforcement of insolvency is not the preferred route, there will still be instances where it could happen. Anyone facing these issues can save time and money, and possibly their businesses too, by seeking advice from professionals with experience of liaising with the tax man and who can recommend the best course of action.”

A total of £81.2bn of taxpayers’ money was distributed in furlough payments aimed at job retention, Self Employed Income Support and the Eat Out to Help Out scheme.
The payments were grants with a requirement for them to be repaid if businesses overclaimed in error. Many businesses also face repaying deferred tax, either VAT or unpaid tax bills because of trading or cashflow difficulties.

Ms Campbell added: “The aim was to get support to where it was most needed as quickly as possible to protect livelihoods. The bulk of the amount claimed in error relates to furlough payments. So far, £350m has been returned through online voluntary submission and payment procedures.

“Although HMRC does not expect to recover all grants paid out in error, over 1,200 additional members of staff have been recruited and are actively working to reclaim outstanding amounts. HMRC has indicated that the objective is consensual resolution using agreed repayment plans.

“There is clear benefit to businesses who may have claimed in error, to step forward now or face additional penalties and potentially forced insolvency.”