Furlough fraud

HMRC has received more than 7,600 furlough fraud reports and is investigating over 4,500 cases. The first arrests took place in July 2020 in the Midlands involving £480k suspected fraud.

Background

The UK government has offered financial support to businesses during the Covid-19 pandemic.  The Coronavirus Job Retention Scheme (CJRS) came into operation at the start of the pandemic in 2020.  Many businesses considered how to sustain their business and retain staff.  Businesses sought to get some or all of their employees onto CJRS as quickly as possible.

Some businesses may have made genuine mistakes with their claims. Perhaps incorrect details were submitted, or other administration errors were made which had not been corrected.  HMRC have indicated that businesses have 30 days grace to inform them of any such mistakes made.

What can be claimed under CJRS?

Initially, up to 80% of an employee’s wages can be claimed with a cap set at £2,500 per month.  The monthly amount of support has subsequently been reduced in stages.

What is furlough fraud?

Furlough Fraud is when a business makes an invalid claim under CJRS.  An invalid claim can be for a fictitious employee or for an actual employee that they know is still carrying on work for them.

Is it a criminal matter?

HMRC has stated that furlough fraud can be investigated either on a criminal basis or a civil basis.

If a criminal stance is taken, then the following may apply:

  • Possible dawn raid and arrest;
  • Formal interview under caution at police station;
  • Charging leading to potential prosecution ;
  • A Confiscation Order under the Proceeds of Crime for the invalid payments plus interest;
  • Naming and shaming in the media.

If a civil stance is taken, then the following may apply:

  • Clawback of the invalid payments;
  • A penalty of between 30-100% of the invalid payments claimed;
  • Personal liability for directors;
  • Naming and shaming in the media.
What can be done?

HMRC has sent out ‘nudge’ letters to businesses to warn them of overclaiming furlough and have offered an amnesty to disclose any  irregularities. These letters expire 90 days after the furlough payments were made.

If you believe that any invalid payments have been claimed, you  should seek specialist advice as you may need to consider making a Disclosure to HMRC.

Help is at hand

If you would like to discuss this matter further, please contact me at paul@pmc.tax or on 07979 313 010.

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