Despite the lockdown, it’s looking increasingly likely that the end could be near for COVID19. It may not be completely eradicated any time soon, but vaccines (and warmer weather) could feasibly bring it under control. It’s probably safe to assume that as soon as a “new normal” is established, the government will have to look at paying the bill for 2020. Bluntly, that means tax.
Mixed news for the self-employed
HMRC does appear to be willing to offer at least a bit of leniency to the self-employed. It’s already allowed for late payment of some tax. Now, it’s effectively allowed the late filing of self-assessment returns by waiving the penalties for returning them late. On the other hand, it is still going full steam ahead with the extension of IR35.
Aggressive pursuit of tax-management schemes
The line between tax avoidance and tax evasion can be a very fine one. Given the government’s need for revenue, it’s probably safe to assume that HMRC is going to get particularly tough on tax-management schemes. It’s also probably safe to assume that HMRC is going to take the approach of “collect first and negotiate later”.
What that means in practice is that HMRC is probably going to be fairly liberal with its use of accelerated payment notices. APNs are basically orders to pay a disputed amount within a certain time. They cannot be appealed but they can be challenged. This would typically be either because HMRC demanded an incorrect sum or because the dispute does not meet the criteria for issuing an APN.
They can also be negotiated. HMRC does have the upper hand here. At the same time, however, they are still expected to act responsibly and with forbearance. In other words, if you can demonstrate that paying the APN would cause you unreasonable hardship, HMRC may change its terms. For example, they might reduce the amount or give you more time to pay.
Be aware that HMRC issuing an APN does not necessarily mean that they are actually entitled to the money. There is nothing to stop you from disputing their claim. You do, however, need to pay up (unless you can demonstrate hardship) or else you could find yourself penalized for non-payment, even if you win your case.
Investigations into COVID19 claims
Some big-name companies made headlines by returning furlough cash they didn’t need. This may have been out of genuine public-spiritedness, or at least a desire to keep on good terms with their customer base. It might, however, also have been pragmatic recognition of the fact that HMRC was unlikely to take kindly to people taking government funds they didn’t need.
HMRC is likely to be particularly highly-motivated to root out any instances where COVID19-related support measures have been abused. Firstly, it could potentially recover significant amounts of money for the government. Secondly, it is likely to see the issue as a matter of strong principle and hence worthy of extra effort.
This means that anyone who has accessed COVID19-related support measures could expect to find themselves on HMRC’s radar. There is no reason to panic about this. It may, however, be advisable to record as much as you can remember of anything you have done in connection with your business since the first lockdown. This could help you to answer any questions raised by HMRC.
For example, if you kept in contact with furloughed employees, then you might be called upon to explain the nature of this contact. Employees on furlough were not supposed to be working for their employer. This means that, in principle, there should not have been a need for their employer to contact them, at least not regularly. In practice, there might have been many reasons why you would have done so.
If you would like help or advice, please do not hesitate to contact us.