Once the conversation turned from support for businesses impacted by the lockdown to a phased return to workplaces across the UK, HMRC seized the opportunity to remind business owners that they would be undertaking more inspections to uncover furlough fraud.
Reporting of non-compliance and fraudulent use of the Coronavirus Job Retention Scheme (CJRS) has jumped massively over the last couple of weeks, with HMRC urging employees who suspect their employer has committed fraud to inform on them
As a result, the number of reports from aggrieved employees runs into thousands. Not everyone using the HMRC reporting portal is likely to know if the fraud is deliberate or accidental, but the outcome is likely to be the same, with the Revenue drawing little distinction between the two.
Companies are at risk of an HMRC inspection in respect of the payments they have received and also to ensure the business has complied with the rules of the CJRS, despite many complaining they were difficult rules to understand.
Check everything and make no assumptions
It goes without saying that businesses need to be very careful when submitting their claims to HMRC and should ensure the information provided is accurate, relevant and current, to avoid any accusation of fraud, even it appears accidental.
The information required is simple enough, but again, check everything carefully and do not assume details concerning the number of furloughed employees is the same from one week to the next.
It’s also important to note that the recently announced changes to the scheme and introduction of the flexible furlough appear to increase the risk of ‘accidental fraud’ which may also go some way to explaining the tough stance being adopted by HMRC.
For example, from 1 July a business will not be able to claim for more employees than the maximum claimed for previously, which means they must establish the maximum number of employees they want to make a claim for from 1 July onwards and ensure this many have been claimed for before.
The potential for backdated claims to be made or workers being told they are on flexible furlough, when they are not and a full furlough claim is being made, highlights the risk of fraud, which could attract serious consequences.
Additionally, under the rules of the CJRS, employees are not permitted to carry out any work on behalf of their employer whilst on furlough. If an employee has been required to undertake work whilst furloughed and their employer has claimed under the CJRS, they risk having committed fraud.
If, as many expect, there are a host of redundancies when the crisis passes, there is an increased risk of disgruntled ex-employees making accusations of fraud, which my give rise to an HMRC inspection. It will pay every business to be very careful if they fell they may have made mistakes.
Should a business become aware it has claimed more than it was entitled to in a previous claim, the HMRC portal has now been updated to enable the repayment of any over-claimed money, by having it deducted from the current claim being made.
The cost of reputational damage
If an investigation takes place and HMRC finds the business has claimed money fraudulently under the CJRS, accidentally or otherwise, they are likely to be required to repay any monies they have received fraudulently. Further sanctions from HMRC are also possible, it has indicated.
The Government has not yet indicated the sanctions that may be imposed, but previously imposed these have included ‘naming and shaming’ the offenders, requesting repayment of monies and issuing additional penalties. There is also the possibility of Criminal Investigation and Prosecution.
Of course, for many businesses, the threat of reputational damage is also a very real risk, given the mood in the country as a whole against anyone seen to be benefitting from the difficulties or misery of others during the coronavirus crisis.