Source · Select Committees · Public Accounts Committee
Recommendation 23
23
Rejected
While HMRC had by October 2022 exceeded its target to open 30,000 civil cases on...
Recommendation
While HMRC had by October 2022 exceeded its target to open 30,000 civil cases on the employment support schemes during 2020–21 to 2022–23, the level of penalties it has issued has been small compared to both the overpayments it has identified and the billions of pounds of error and fraud. By March 2022, HMRC had issued £3.5 million of penalties to those who overclaimed SEISS grants (the equivalent of 7% of total overpayments identified through its civil cases covering SEISS). For CJRS the figure was £1.1 million (0.5% of CJRS overpayments).41 We challenged HMRC about its approach on penalties as we were concerned that it does not provide an incentive for those who have identified they made an error in their claims to make a repayment. In particular, we asked HMRC why it had not issued penalties in four cases where the NAO found there were strong 34 C&AG’s Report paras 30.20, 3.36–3.37 35 For example, Committee of Public Accounts, Tackling tax fraud, 34th Report of Session 2015–16, HC 674, April 2016, pages 5 and 6; and Committee of Public Accounts, Collecting tax from high net worth individuals, 36th Report of Session 2016–17, HC 774, page 6 36 Public Accounts Committee, Fraud and Error, Ninth Report of Session 2021–22, HC 253, 30 June 2021 37 Qq 52, 84–86; C&AG’s Report, para 3.36 38 Q 84 39 Letter from Janet Alexander, Director, Compliance Operations, HM Revenue & Customs, to Chair of the Committee of Public Accounts, 21 November 2022 40 Qq 57, 84–86 41 C&AG’s Report, paras 3.26, 3.38 COVID employment support schemes 15 indications that claimants may have deliberately inflated claims beyond their entitlement.42 HMRC said that it was not enough to be suspicious or sceptical about a claim - it had to demonstrate that a person deliberately made a false claim or over an over-claim to impose financial penalties. If a case went to Tribunal it would need evidence that the false claim or over-claim was deliberate. HMRC accepted that fraud may have occurred in the four cas
Government Response Summary
HMRC disagrees and states it will continue its compliance activity on COVID-19 schemes and consider whether penalties can be charged within the legal framework. Penalties can only be applied where it is lawful for HMRC to issue them, and there is sufficient evidence of deliberate behaviour that could be shown in a tribunal or in court.
Government Response
Rejected
HM Government
Rejected
5a: PAC recommendation: HMRC should increase the number of employers it penalises for making excessive claims; and incentivise other employers to repay grants they have wrongly claimed. 5.1 The government disagrees with the Committee’s recommendation. 5.2 In line with the recommendation, HMRC will continue its compliance activity on COVID-19 schemes and consider whether penalties can be charged within the legal framework. However, HMRC is unable to pre-determine case outcomes and as a result, is unable to determine whether there will be an increase in penalties in the future. 5.3 Legislation was included in Finance Act 2020 to enable HMRC to carry out compliance activities in relation to those claiming support from the COVID-19 employment support schemes. The legislation specifically provided that penalties would only be charged where grants were deliberately overclaimed. The compliance approach, supported by Parliament, was designed to recognise that claimants might make mistakes given the new and changing obligations under the schemes. 5.4 The test for charging penalties in the COVID-19 employment schemes is for HMRC to show, on the balance of probability, that the person knew either at the point of claim that they were not entitled to the Covid grant, or that they had ceased to be entitled to the grant. Penalties can only be applied where it is lawful for HMRC to issue them, and there is sufficient evidence of deliberate behaviour that could be shown in a tribunal or in court. 5.5 Since the start of compliance activity on the HMRC-administered COVID-19 employment support schemes, HMRC has charged over £12.8 million in penalties in addition to recovering over £1 billion of overclaimed support through its compliance checks. Claimants also have the chance to put things right, without fear of sanctions by repaying their claim, and HMRC has received over £1 billion in repayments outside its compliance checks.