The Finance Act 2020 helps to deliver fairness across the tax system by recovering wrongly claimed COVID-19 support scheme payments and influencing those who see insolvency or dissolution as a way of avoiding tax due on COVID-19 support payments.
Where HMRC believe that a company (to include LLPs) is insolvent or about to become insolvent, and overclaimed Coronavirus Job Retention Scheme (CJRS) grants owed will not be paid, they may give a notice making an individual (or individuals) jointly and severally liable for the relevant tax liabilities. This means that all individuals given a notice will be jointly and severally liable with the company for paying these liabilities.
HMRC have issued guidance setting out the conditions that need to be present in order to use their powers:
An officer of HMRC may give a joint and several liability notice to an individual if they are satisfied that all 4 of the conditions A to D set out in the legislation have been met
- the company is subject to an insolvency procedure, or there is a serious possibility of becoming subject to one (condition A)
- the company is liable to an income tax charge as a result of receiving a COVID-19 support payment it was not entitled to receive (condition B)
- the individual was responsible for the management of the company at the time the tax first became chargeable, and the individual knew (at that time) that the company was not entitled to the relating COVID-19 support payment (condition C)
- there is a serious possibility that some or all of the income tax liability will not be paid (condition D)
Further information can be found: https://www.gov.uk/guidance/overview-of-joint-and-several-liability-notices-for-the-taxation-of-coronavirus-covid-19-support-payments
