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HMRC investigating Eat Out to Help Out Scheme claims

HMRC is checking Eat Out to Help Out claims to ensure their accuracy and recover any overpayments caused by careless errors or false claims. If you receive a 'nudge letter' from HMRC, specialist advice is strongly recommended to avoid formal compliance checks. 

For many, the Eat Out To Help Out (EOTHO) scheme may seem like a thing of the past. However, HMRC is still reviewing the claims of thousands of hospitality businesses that used the vital relief during the COVID-19 pandemic. As such, we share how our Tax Investigations and Dispute Resolution team helped a business whose EOTHO claim came under HMRC’s spotlight.

About the author

Mark Taylor

+44 (0)20 7710 3389
taylorm@buzzacott.co.uk

For many, the Eat Out To Help Out (EOTHO) scheme may seem like a thing of the past. However, HMRC is still reviewing the claims of thousands of hospitality businesses that used the vital relief during the COVID-19 pandemic. As such, we share how our Tax Investigations and Dispute Resolution team helped a business whose EOTHO claim came under HMRC’s spotlight.

The Eat out to Help out Scheme

The Eat out to Help out Scheme

On 7 July 2020, the government announced the EOTHO scheme where every Monday, Tuesday, and Wednesday throughout August 2020, restaurants could offer a 50% discount on food or non-alcoholic drinks to eat or drink in, up to a maximum of £10 discount per diner. A reimbursement could then be claimed back from HMRC for the equivalent amount. While the EOTHO scheme proved to be successful, it’s estimated that of the £81.2 billion invested into COVID-19 support schemes by the UK government, 8.5% has been lost to fraudulent and erroneous claims in respect of the EOTHO scheme. As a result, HMRC has now introduced a new Taxpayer Protection Taskforce to recover this lost revenue, which Buzzacott and our client Olivia* have seen first-hand.

Testing the feasibility of EOTHO claims

Testing the feasibility of EOTHO claims

In May 2021, Buzzacott was contacted by Olivia, a Director of a hospitality business in need of professional representation. Her business had received a letter from HMRC, notifying her that it had opened a check into EOTHO claims made by her business. While the business had made claims on behalf of its two cafes throughout the EOTHO period, there was no reason at the outset to suspect that the claims may contain errors. 

We worked with Olivia and conducted a full review of the businesses’ affairs to establish the feasibility of the claims. We closely examined the number of covers for each claim period, the size and number of maximum covers for both premises, the business’ opening hours, and the level of turnover in the same period of the previous year of trading. 

From this review, we concluded that the business was capable of dealing with the number of diners submitted within the EOTHO claims – which had been its key risk when HMRC launched the claims check. We presented this to HMRC, who fully accepted our analysis work and agreed. However, HMRC then went on to undertake its own analysis work in respect of the cafes’ till reports comparing these with claims for each EOTHO period. As a result, HMRC believed there to be errors within the claims. 

Buzzacott carefully tested HMRC’s analysis work from which we concluded it contained some crucial mistakes. We established that the EOTHO claims for certain periods had been inadvertently mixed up between the two cafes, which in turn, resulted in overclaims and underclaims being submitted. 

After further discussions with Olivia, we discovered that the employee who ordinarily handled the business’ financials had been furloughed during the EOTHO scheme, leaving her to deal with the claims herself. Upon reflection, she accepted that because of her lack of expertise in data analysis, coupled with the immense pressure of running a business during the pandemic, it was possible that she had made mistakes when entering the figures into HMRC’s portal. While the business had made a moderate overclaim in the first week of the scheme, this was offset by a sizeable underclaim during the final week of the scheme.

How can we help?

In what circumstances can businesses correct their claims?

Controversially, HMRC has maintained that EOTHO claims cannot be adjusted in favour of the taxpayer, as the scheme has now ended. HMRC currently only allow for amounts overclaimed to be corrected and paid back to HMRC. Therefore, if a business has inadvertently submitted an underclaim through the EOTHO scheme, there is no avenue to now recover this.

We argued that HMRC’s current stance on adjustments to EOTHO claims was unfair. Given HMRC accepted that the errors in our client’s claims arose from innocent mistakes, HMRC agreed to our request to off set the underclaimed and overclaimed amounts with no further questions or adjustments required. While the client was still in a net underclaim position, she was happy to bring the enquiry to closure so she could concentrate her time and efforts on her business.  

Most notably, HMRC did not seek to recover the overclaim or charge any penalties even though its published guidance would suggest being necessary for an overclaim period. 

How can we help?

This case demonstrates how the assistance of a tax investigation specialist can make a difference, even when HMRC’s own guidance suggests that there is no alternative. We expect HMRC to continue probing EOTHO claims. If you have concerns about your claims, we can carry out a review and help you correct any inaccuracies. 

For a free and entirely confidential discussion regarding how we can help you correct any inaccuracies in your EOTHO claims, please call +44 (0)20 7710 3389.

* This clients name has been changed to protect their confidentiality

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If you'd like us to give you a call, fill in your details below and we'll email to arrange a good time to speak to our Head of Tax investigations team, Mark Taylor. All communications are in the strictest confidence.

If you'd prefer to speak to our team directly, please call +44 (0)20 7710 3389.

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