What is a “nudge” letter?

HMRC are currently writing to around 3,000 employers a week with furlough fraud letters saying they may have to repay sums they have claimed under the Coronavirus Job Retention Scheme or CJRS for their furloughed employees. HMRC are asking that the employers reply to the “nudge” letter whether or not they think they have overclaimed CJRS payments. Employers who have overclaimed furlough payments whether through innocent error or furlough fraud should contact HMRC and arrange to repay CJRS payments. HMRC will investigate furlough fraud errors.

Should you respond to a “nudge” letter?

If you have checked and are content that you have not overclaimed CJRS payments under the furlough scheme then there is no need to respond to HMRC’s “nudge” letter. However, if you have overclaimed then the overpayment is liable to an income tax charge of 100% and you could also be liable to a penalty of up to 100% if you fail to inform HMRC. There is a furlough fraud amnesty if you report the overclaim within the time limit.

What is the amnesty time limit?

  • You must notify HMRC by the later of 90 days after 22 July 2020 and 90 days after the 100% income tax became chargeable on the CJRS overpayment otherwise a failure to notify (“FTN”) penalty under Schedule 41 FA 2008 of up to 100% will apply
  • If you knew at the time the 100% tax charge became notifiable that you were not entitled to it, then the FTN penalty will be treated as deliberate and concealed and this means the penalty will be between 30 -100% of the overpayment
  • Repayment of the furlough money within the 90-day period avoids an FTN penalty

How will furlough fraud be treated?

An innocent error in claiming furlough payments will not be prosecuted but a deliberate overclaim is furlough fraud and you could be prosecuted for cheating the public revenue, fraudulent evasion of income tax (s106A TMA 1970) or failure to prevent facilitation of tax evasion (Criminal Finances Act 2017). If you are at risk of criminal investigation for furlough fraud you should get legal advice as soon as possible to resolve the situation without risking a criminal investigation by HMRC .

Can you appeal against a tax investigation?

Yes, you can appeal against the decision of HMRC at the end of a tax investigation to the tax tribunal. It is best to obtain expert legal advice in preparing your appeal so that it stands the best possible chance of success.

How can Patrick Cannon help?

Patrick is an expert in financial crime and in advising clients who may have committed furlough fraud and can provide you with expert legal advice and assistance if you are worried that you have received overpayments of CJRS or furlough monies or you are under investigation for furlough fraud. Contact Patrick today.

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For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.