HMRC crack down on furlough fraud

HM Revenue and Customs (HMRC) have announced that companies who have committed ‘furlough fraud’ now have 90 instead of 30 days to confess what they have done, as there is a belief that businesses that have taken advantage of the scheme have done so accidentally.

When the scheme was first launched businesses were very much encouraged to apply for the financial support to help avoid mass redundancies. At the time of the launch there was not much clarity regarding what HMRC enforcement would look like.

At the end of May HMRC had received almost 1,900 reports from the public of alleged furlough fraud, with HMRC promising to take criminal action in the most serious cases. (FTadviser)

The Coronavirus Job Retention Scheme has been a lifeline for many businesses, yet there is increasing evidence that it is being abused, for example, by employers asking staff to work whilst on furlough. Whilst it is clear that this is wrong, businesses may easily find that they have inadvertently breached the rules as little guidance was available when the first claims were being submitted.

HMRC has a duty to investigate where it believes fraudulent activity is happening, so it is not surprising that investigations are already underway.

The Finance Act introduces a 90-day amnesty that puts the onus on businesses to notify HMRC of any overclaim. Businesses that do not notify will be treated as deliberately concealing overpayments from HMRC and can attract penalties of up to 100% of the amount overclaimed.

HMRC is sending a clear message to businesses – take advantage of this amnesty or face investigation.

It is vitally important that businesses keep good and clear records of staff on furlough, particularly as it is now possible to allow staff to return part-time. Businesses should also be able to demonstrate clear communication to staff on furlough that explains the rules.

Anna Craig, Managing Consultant

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