Furlough ends, but fraud doesn’t…

First published on 01 October 2021 by Alastair
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Furlough ended yesterday. There are a host of different views about it, but there is no doubt that it has helped many businesses survive the biggest downturn most of us have experienced.  What’s also not in doubt is that because of the speed with which the scheme was put together, it has been a magnet for fraudsters.  That’s not my opinion, it’s the opinion of HMRC’s Chief Exec, who used those exact words about furlough when speaking to the House of Commons Public Accounts Committee in June 2020.

To put some numbers on the potential loss to the public purse, the number of whistleblowing reports to HMRC about suspected fraud increased from 3,000 reports in April 2020 to 21,378 by January 2021. A year ago, in September 2020, HMRC told the Public Accounts Committee it was investigating more than 27,000 current, ‘high risk’ furlough claims.  These numbers will be even higher today.

Examples of furlough fraud include:

  • an employer making a claim under the Scheme for a non-existent employee; 
  • an employer making a claim under the Scheme on behalf of an employee without the employee’s knowledge whilst they continue to work as normal;
  • an employer placing an employee on furlough but requiring them to continue to work as normal; and
  • an employer misrepresenting the hours an employee has worked in order to maximise the amount recoverable under the Scheme. 

In March this year, the Taxpayer Protection Taskforce (in effect, a Fraud Squad) was created by the government to investigate Covid-19 related fraud. Whilst acknowledging that the vast majority have used the scheme correctly, a UK think tank believes that this fraud could result in the Exchequer (i.e. the country, aka us) losing as much as £7.9bn.

HMRC stresses, and we couldn’t agree more, that this is taxpayers’ money and any related fraud needs to be severely curtailed, with anyone convicted suffering the full force of the law.  £7.9bn could pay for a lot of nurses, policemen, business rates holidays, etc.

It is our understanding that this Fraud Squad will continue to operate for at least another year, if not longer.  Undoubtedly, there will be many criminals brought to book, but there will also, we suspect, be others who for a variety of reasons (simple error or, worse, malicious and unfounded whistleblowing) are subject to a serious grilling over their use of the furlough scheme. If you have any concerns whatsoever, please get in touch. We are tax specialists with a unique understanding of how HMRC works and (so long as you haven’t actually committed fraud!), we will be able to help you with any concerns.

Stewart McKinnon, Director, M&S Accountancy & Taxation

 

 

 

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