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HMRC and furlough fraud

The Coronavirus Job Retention Scheme (Scheme) has supported over nine million jobs in the UK and is due to end on 31 October 2020, having cost the Treasury over £30 billion. Whilst most companies are using the Scheme lawfully, some are not passing furlough funds onto their workforce, making fraudulent claims or expecting their employees to continue working whilst on furlough. Our employment lawyers explore the issue of furlough fraud.

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Published 25 August 2020

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The Coronavirus Job Retention Scheme (Scheme) has supported over nine million jobs in the UK and is due to end on 31 October 2020, having cost the Treasury over £30 billion.

As the Scheme begins to wind down HMRC is currently investigating thousands of reports of furlough fraud. Police have arrested a man in the West Midlands in connection with a suspected £495,000 fraud and HMRC has started cracking down on others who have abused the Scheme.

Andrew Granger, Partner in Collyer Bristow’s Employment Team, was recently quoted in Estate Agent Today highlighting how HMRC is beginning to take action against those employers who may have abused the Scheme, saying ‘the scheme has been a lifeline for many businesses yet there are reports that it is being abused, for example, by employers asking staff to work whilst on furlough’.

Whilst most companies are using the Scheme lawfully, some are not passing furlough funds onto their workforce, making fraudulent claims or expecting their employees to continue working whilst on furlough.

A recent study by the Universities of Oxford, Cambridge and Zurich has highlighted that the government’s ban on employees working whilst on furlough leave was ‘routinely ignored’, with up to 63% of furloughed employees working for their employer. This indicates the scale of the potential abuse.

Companies might argue in their defence that the Scheme is complex and the rules have changed on several occasions, including giving greater flexibility in recalling staff from furlough.  HMRC has indicated that it will be more lenient where an employer has made a genuine error and self-reports their mistake. However, if an employer is found to have intentionally abused the Scheme, then there could be serious consequences including significant financial penalties and criminal charges including a custodial sentence.

If you are an employer who has used the Scheme then it is imperative that you undertake a robust internal audit to ensure that the any claims you have made have been lawful and the monies received have been correctly distributed. Should you discover any mistakes these must be declared to HMRC as soon as possible to avoid penalties and sanctions.

Our Employment Team has been advising on the Scheme throughout the pandemic and is happy to talk to you regarding your particular circumstances and any concerns that you might have on its application.

 

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Longer Reads

HMRC and furlough fraud

The Coronavirus Job Retention Scheme (Scheme) has supported over nine million jobs in the UK and is due to end on 31 October 2020, having cost the Treasury over £30 billion. Whilst most companies are using the Scheme lawfully, some are not passing furlough funds onto their workforce, making fraudulent claims or expecting their employees to continue working whilst on furlough. Our employment lawyers explore the issue of furlough fraud.

Published 25 August 2020

Associated sectors / services

  • Employment law for employees
  • Employment law for employers

Authors

The Coronavirus Job Retention Scheme (Scheme) has supported over nine million jobs in the UK and is due to end on 31 October 2020, having cost the Treasury over £30 billion.

As the Scheme begins to wind down HMRC is currently investigating thousands of reports of furlough fraud. Police have arrested a man in the West Midlands in connection with a suspected £495,000 fraud and HMRC has started cracking down on others who have abused the Scheme.

Andrew Granger, Partner in Collyer Bristow’s Employment Team, was recently quoted in Estate Agent Today highlighting how HMRC is beginning to take action against those employers who may have abused the Scheme, saying ‘the scheme has been a lifeline for many businesses yet there are reports that it is being abused, for example, by employers asking staff to work whilst on furlough’.

Whilst most companies are using the Scheme lawfully, some are not passing furlough funds onto their workforce, making fraudulent claims or expecting their employees to continue working whilst on furlough.

A recent study by the Universities of Oxford, Cambridge and Zurich has highlighted that the government’s ban on employees working whilst on furlough leave was ‘routinely ignored’, with up to 63% of furloughed employees working for their employer. This indicates the scale of the potential abuse.

Companies might argue in their defence that the Scheme is complex and the rules have changed on several occasions, including giving greater flexibility in recalling staff from furlough.  HMRC has indicated that it will be more lenient where an employer has made a genuine error and self-reports their mistake. However, if an employer is found to have intentionally abused the Scheme, then there could be serious consequences including significant financial penalties and criminal charges including a custodial sentence.

If you are an employer who has used the Scheme then it is imperative that you undertake a robust internal audit to ensure that the any claims you have made have been lawful and the monies received have been correctly distributed. Should you discover any mistakes these must be declared to HMRC as soon as possible to avoid penalties and sanctions.

Our Employment Team has been advising on the Scheme throughout the pandemic and is happy to talk to you regarding your particular circumstances and any concerns that you might have on its application.

 

Associated sectors / services

  • Employment law for employees
  • Employment law for employers

Authors

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