Furlough fraud – 1,000 Inspectors with £100m of funding

tax avoidance

The Budget delivered on 3 March 2021 may be seen by some as uneventful.  Some good news was the fact that the Furlough scheme has been extended again until the end of September 2021 – but with a potential sting in the tail.  The Chancellor has clearly felt that some of the claims made are tantamount to furlough fraud.  In the Budget it was announced that a Taxpayer Protection Taskforce was being set up to crack down on those who defraud Covid-19 (Coronavirus) government support initiatives, including the Coronavirus Job Retention Scheme (CJRS), commonly called the furlough scheme.

Can an employer repay a claim?

Yes.

Interestingly, in a separate report, approximately 125,000 employers have repaid £700m of the £53bn that was paid out.  Employers that want to repay some or all of their grants can either do so by making a correction in their next claim to HRMC, or can pay the money directly into HMRC’s bank account after they have obtained a payment reference number.

What are the rules?

Initially, each month the UK government reimbursed the lower of 80% of an employees wages and £2,500.  This has since been reduced.

While an employee is on furlough they can take on other jobs, as long as it doesn’t break the rules of their contract.  An employee on furlough can also:

  • take part in training, or volunteer for an unconnected organisation;
  • be furloughed whether they are on a full-time, part-time, agency, flexible or zero-hour contract but they  must have been on their employer’s payroll;
  • be furloughed more than once.

Not necessarily the easiest set of rules to follow and errors can be made.

Have the rules changed?

Yes.

Initially, employees had to be on full time furlough or not at all.  An employer can also claim the reimbursement under furlough if an employee is unable to work due to caring responsibilities or because they are clinically extremely vulnerable.  Since the summer of 2020, employers have been able to bring back workers part-time and furlough them for the rest.  Employers pay employees for the actual hours they work as wages.

What is furlough fraud?

Furlough fraud is not where a mistake has been made in completing the claim(s).  Nor can it be accidental fraud.

The frauds are said to include claiming for:

  • employees that are not on the payroll for the period concerned;
  • anyone who is still working normally on revenue generating work;
  • inflating  the amounts being paid to employees.

What has happened?

HMRC regularly receives information from “well wishers” including current employees, past employees who may or may not be disgruntled  employees.  The number of tip offs to do with furlough fraud has risen from 3,000 in April 2020 to 21,378 in January 2021.

What are the consequences?

First and foremost HMRC will investigate.  This can involve a full review of the books and records of the business.  HMRC will not be blinkered and will follow up on any suspected irregularity.  What may be unclear is whether it will be acted upon by HMRC as a criminal or civil matter.  There has already been a report in July 2020 of the arrest of a businessman in Solihull on suspicion of an alleged furlough fraud involving £495,000.  A further eight men from across the Midlands were also detained.  The investigation involved the deployment of more than 100 HMRC officers to 11 locations.

  • Rather than face the trauma of an investigation, is there any merit in having any past claim reviewed?
Help is at hand

Not all investigations conducted by HMRC are on a criminal basis.  Depending upon the facts, even deliberate errors can be resolved on a civil basis.

If you have a matter that you wish to discuss, please call me on 07979 313 010 or email me at paul@pmc.tax for a free, initial no obligation consultation.

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