Rachael Lloyd
Posted on 11 Aug 2020

HMRC reports rise in allegations of "furlough fraud"

HMRC has reported a 53% rise in reports of employers fraudulently claiming from the Coronavirus Job Retention Scheme, from 4,400 reports at the end of June to 6,749 by 22 July 2020. This follows the first arrest, at the beginning of July, of an individual in Solihull on suspicion of defrauding the scheme of £495,000. It is worth noting that this arrest was not solely for furlough fraud, but also a separate suspected multimillion-pound tax fraud and alleged money laundering offences.

The significant rise in reports of fraud follows accounts that approximately 1 in 3 individuals who were placed onto furlough leave had been asked to carry out work for their employer, in contravention of the scheme's rules.

Employers need to ensure that they are carefully auditing the claims that they have made to the Job Retention Scheme to ensure that any accidental errors can be identified and resolved. The Government has released guidance for employers who believe that they have claimed too much or not enough from the scheme, accessible here. Some key points to note from this guidance are as follows:

  • If you want to "delete" a claim, you must do this within 72 hours of making the claim.
  • If you have made an error in a claim and received too much, you must pay this back to HMRC by either (i) informing them as part of your next claim, or (ii) where you are not submitting another claim, contacting HMRC to pay back the money.
  • Any overclaim must be notified to HMRC by the latest of (i) 90 days after the date you received the grant to which you were not entitled, (ii) 90 days after the date you received the grant that you were no longer entitled to keep because your circumstances changed, or (iii) 20 October 2020.
  • Where an overclaim is not dealt with in accordance with the above, an employer may be liable to pay a penalty.

We anticipate that a proportion of complaints will be spurious and merely an employee's expression of dissatisfaction for certain business decisions made by their employer, such as carrying out redundancies whilst the scheme is still available. It is important to note that the scheme does not prevent businesses from making redundancies where there is a genuine redundancy situation, despite the continuation of the scheme until the end of October 2020.

Notwithstanding the above, it is important for employers to ensure that employees do not carry out work whilst on furlough or, in the case of flexible furlough, work outside of their agreed working hours. It is recommended that employees expressly agree in writing not to carry out such work when being placed on furlough and, again, on any subsequent occasion where the period of furlough is extended.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Rachael Lloyd or Siobhan Murphy to discuss any issues you are facing.