The legislation added to the Finance Act 2020 uses the tax system to recover unfair or incorrectly requested income support payments – i.e., Payments required under the Coronavirus Retention Scheme (CJRS) and the Self-Employment Income Support Scheme (SEISS). This includes situations where the employer has not paid all government funds to employees in full and loses the right to them. The law regulates the refund of payments to which the recipient was not entitled by converting every pound of surplus or wrongly requested payment into GBP income tax – i.e., 100% return. Considering it a tax liability, the government can then use the established legal and practical mechanisms of the HMRC to recover the funds.

If an enterprise or individual is aware that it has received or withheld any payment of state support by mistake, this must be reported to HMRC no later than 90 days from 20 October 2020, 90 days from receipt of payment or 90 days from loss of entitlement to payment. Since refund amounts are treated as taxes, they fall due on the usual tax payment dates for individuals and companies (although, for large companies, taxes on payments to which companies were not entitled will not affect quarterly instalments).

HMRC has the right to raise an estimate for the refund of such overpayments at any time and then payment is due 30 days after the assessment (unless there is a deferral complaint or payment timing agreement). If overpayments are returned or assessed, then they should not be placed on the recipient’s personal or business tax return.

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