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HMRC to investigate ‘furlough fraud’

Authored by Lisa Hogg

Lisa Hogg

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Approximate read time: 3 minutes

HMRC is preparing to investigate fraudulent claims (furlough fraud) made to the government’s Coronavirus Job Retention Scheme by companies hit by the effects of COVID-19.

The scheme was introduced after the lockdown began in March, seeing businesses across the nation forced to close their doors, and place staff on leave. It guaranteed workers affected by the virus payment of at least 80% of their regular monthly wage while on leave, and reimbursed companies for this amount.

As of the beginning of June, over £20bn had been paid out to companies through the scheme. It has been reported that over nine million employees nationwide have had their wages made subject to the scheme.

What constitutes furlough fraud?

The Coronavirus Job Retention Scheme (Furlough Scheme) requires that companies place staff on temporary leave in order for their wages to be covered. They must be given written notice of this leave, and a meeting must be held prior to its initiation to discuss the terms.

During this leave, the employee in question must not be asked to fulfil their regular working duties. Any breach of this requirement, or failure to notify the employee, could amount to a fraudulent claim.

What if my company has breached the terms?

If you think that your company may have breached the terms of the Furlough Scheme, whether on purpose or by mistake, it is important to recognise this. HMRC is expected to give companies a 30-day window in order to confess fraudulent claims and malpractice associated with the scheme, before the department begins its formal investigation into the matter.

It is crucial to understand and commit to the terms of the scheme by ensuring that employees are given notice, are offered support through their statutory rights, and are not asked to work while on leave.

It is also important to check all the information that your company has given to HMRC regarding your employees’ wages. If you are found to have submitted a claim for more than you are entitled, this may be regarded as fraudulent.

HMRC has set up an online reporting system whereby workers may report their employer for being in breach of the scheme’s terms. As of the end of May, almost 1,900 reports had been filed indicating possible cases of fraud.

What will happen to companies who do not confess?

At the end of the proposed 30-day period offered for companies to confess fraudulent claims, it is expected that HMRC will begin their investigation with full effect. Companies found to have exploited the scheme through fraudulent claims, or by encouraging employees to work while on leave, could be pursued with both criminal and civil action.

It is vital, therefore, that directors take the opportunity of a 30-day window to check over their situation, and confess any acts that may be deemed as ‘furlough fraud’ in breach of the scheme. Committing fraudulent claims, or misusing the Coronavirus Job Retention Scheme is an act that brings with it serious financial and reputational implications, and should not be taken lightly.

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