Furlough fraud warning: HMRC ready to crack down on ‘high risk’ cases and reports

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HMRC has been responsible, over the last few months, for dealing with furlough, otherwise known as the Coronavirus Job Retention Scheme. Furlough was introduced in May to provide financial support to people and businesses affected by the pandemic. While the vast majority of people have used the scheme sensibly, some have deliberately flouted the rules for their own financial gain.

And while HMRC was not legally allowed to carry out investigations into suspected CJRS fraud until the Finance Bill was granted Royal Assent, it now has the green light to crack down on those exploiting the scheme.

Before the passage of the Finance Bill, HMRC states it carried out more than 5,000 targeted call with employers where claims seemed higher than expected, or information gained suggested fraudulent activity.

The Revenue made clear investigation of excessive claims would be taking place in the coming months.

And now, it is poised to tackle claims it suggests are at ‘high risk’.

 

A statement read: “We estimate that we will find around 27,000 high-risk claims.

“We will write to every one of those employers by the end of November, as part of a one-to-many camping to prompt employers to use the opportunity to self-correct.

“Where employers don’t take the opportunity to correct and don’t respond to our prompts, we will carry out one-to-one investigations into their affairs.

“We anticipate carrying out around 10,000 of these investigations between now and the end of the year.”

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In the most egregious rule breaking, HMRC has said it will conduct criminal investigation and potentially hand down penalties.

The Finance Act has given the government legal powers to recover any money which has been overclaimed.

In this regard, an arrest has already been made in relation to suspected criminal activity worth close to £500,000. 

Estimates of furlough fraud are difficult to reach at due to the unprecedented situation at hand.

As such, HMRC will be looking at evidence from the level of fraud in the tax credit scheme to help it inform its estimates.

It believes the level of error and fraud could range from five to 10 percent in the CJRS, but that efforts to help companies comply will bring this estimate down. 

HMRC said: “We have received more than 8,000 calls about potential CJRS fraud. 

“We evaluate every piece of intelligence we receive and will follow up where there is any indication of wrongdoing.

“We encourage anyone who suspects deliberate fraud to contact our fraud hotline services.”

While estimates will help HMRC to crackdown on instances of fraud, the Revenue will have a full and more accurate picture at the end of the year, and in Spring 2021. 

The targeting of individuals and groups who have exploited the scheme is one which should not be surprising to many.

Commenting on HMRC’s approach to furlough fraud back in July, Patrick Cannon, a leading tax barrister, told Express.co.uk: “Six to 12 months down the line, it will really come home to roost how much money has been paid out.

“It will then be easy for the government and HMRC to fall into the mindset of raking as much money back as possible paid in breach of the rules.

“It is money for old rope – if they have clear cases of furlough fraud, then it is going to be straightforward to get it back.”

Through the CJRS scheme 9.6 million jobs have been furloughed, with more than £35billion handed to employers as of August 16.

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