The government’s Covid019 Job Retention Scheme went live on 20 April, enabling employers to make claims of up-to £2,500 per month, per employee, until at least the 30th of June.
HMRC have already expressed concerns that the scheme will be targetted by orgainised criminals looking to profit illegally from payments on offer. A spokesperson was quoted as saying “any scheme like this is a target for organised crime. Any scheme that pays out attracts criminals who want to defraud it and people that are genuinely entitled to it inflate their claims”.
It is estimated that the scheme could pay out up-to £100bn in a matter of months. Some safeguards have been put in place to prevent fraud but there will clearly be attempts to profit illegally. If 1% of claims were bogus that would equate to an eye-watering £1bn-worth of fraud.
What is a fraud and what are the consequences
A fraud, put simply, is the making of a dishonest statement with the intention to obtain a financial gain. An employer could act alone, or with the consent of their employees to commit furlough fraud. Corporations, directors, and individuals can all be investigated, prosecuted and ultimately convicted of fraud. The maximum sentence is 10 years or an unlimited fine. Large businesses can expect fines of up-to £20m for committing fraud.
Examples of furlough frauds
HMRC will be concerned that employers will claim the JRS payment for ‘furloughed’ employees whilst allowing or encouraging them to continue working in some capacity, thus gaining a financial advantage.
A second area of concern will be claims in respect of lower paid employees being inflated in order to increase payments out to employers (and potentially employees) under the scheme.
There will also be concerns that unscrupulous businesses may seek to recruit unnecessary employees purely with the intention of reclaiming the JRS payments.
A difficulty for HMRC is that a staggering number of payments under the scheme will have to be paid out over a very short time period, and it will be impossible for all of the information provided by employers to be checked prior to the claims being paid out.
What steps should businesses be taking
Every organisation should set out a clear structure for employees and in particular managers as to their key responsibilities when dealing with furloughed staff members. Ensuring that managers and furloughed staff understand their duties and the limits of their involvement in the day-to-day activities of a business is key.
All employers must satisfy themselves that the information they provide to HMRC is accurate. If a claim is inaccurate, payment may be withheld or full repayment of the sum claimed could be ordered. Repaying the salary of furloughed employees could have a catastrophic effect on a business.
If a claim is found to be fraudulent then a prosecution may follow. It is therefore essential that great care is taken to present up-to-date and completely accurate information for all furloughed employees. HMRC have been very clear in their intention to robustly pursue any fraudulent claims through the criminal courts.
What should you do if you suspect your employer is abusing the system
Any suspected dishonesty can be reported via an online portal which HMRC have set up. If you suspect that your employer is acting fraudulently then you should take legal advice and make a full disclosure to HMRC. A failure to do so could lead to you, or your employer being prosecuted and convicted of fraud.
Furlough fraud advice
For clear and practical advice on fraud please contact Ison Harrison and ask for Ian Anderson in the Regulatory Department.