If you are under investigation, or face prosecution, for Furlough Fraud or associated allegations, please don’t delay your defence. Reeds Solicitors will provide clear legal advice, and any assistance we can about the allegations. Contact us now to discuss your situation.

During the Coronavirus Pandemic, the Government introduced a range of schemes to reduce unnecessary redundancies.

The Coronavirus Job Retention Scheme (sometimes referred to as CJRS grants) allowed employers to claim a grant from HMRC for a percentage of an employee’s wages who had been furloughed because of the pandemic. Figures released in July 2021 state that a total of £65.9 billion had been claimed by 1.3 million employers, placing around 11.6 million jobs on furlough.

In the first six months of the scheme (April – September 2020) it was claimed that fraudulent furlough claims accounted for nearly £3.5bn. Due to the scheme running until 30th September 2021, the amount HMRC will have lost to fraud is undoubtedly higher.

 

“We are going to be paying out a vast sum of money in a rapid period of time. Any scheme like this is a target for organised crime. Any scheme that pays out I’m afraid attracts criminals that want to defraud it and people that are genuinely entitled to it who inflate their claims.”

(Jim Harra, HMRC’s chief executive, 8 April 2020)

 

With any new government scheme, it is reasonable to assume that some employers may have made legitimate mistakes whilst submitting claims. The general ease of applying for the scheme, and the rapidly changing environment may mean there are those who are currently unaware to have claimed monies erroneously.

Additionally, some businesses have made applications, and on the face of the evidence, benefitted from the schemes, but may well have been victim of cloned applications, or the actions of errant individuals within the company.

 

How Can we Help

Our specialist team of investigative lawyers can conduct a root and branch review of claims made by a business, to ascertain whether they have fallen foul of the rules surrounding the applications and the entitlement to them. We can advise on the potential liabilities and exposure of a business to recoupment, the risks involved and potential strategies which can be adopted to mitigate harm to the business.

If you require representation or advice from our team around allegations related to furlough fraud, please go to our contact us page. We work with our clients in achieving the best possible outcome with a strong defence.

 

Frequently asked questions

What is Furlough Fraud?

Furlough Fraud constitutes any attempt by a person or company to defraud HMRC by erroneous claims through the available schemes. This includes:

  • An employer claiming through the scheme for a non-existent employee;
  • An employer making a claim on behalf of an employee without their knowledge whilst the employee continues to work;
  • An employer requesting furloughed staff to continue working, either from home or ‘volunteering’ their services.
  • An employer misrepresenting the working hours of an employee in order to increase the amount paid out through the furlough scheme (including backdating a claim to cover a period when an employee was still working).
  • An employer not paying the full amount received from HMRC to the furloughed employee.

 

How much furlough fraud has occurred in the UK?

Whilst exact figures are unknown, the HMRC believed the figure was at £3.5bn in Coronavirus Job Retention Scheme fraud in September 2020.

A report focusing on fraud and error through government support schemes estimated the general loss to the public purse from fraud was around £25bn a year. Covid fraud through Universal Credit, furlough and the Bounce Back Loan Scheme could account for losses of over £30bn, more than doubling this number.

It is not possible to accurately estimate the total loss of public money through Coronavirus related fraud at the current time, and how much of that estimate may be intentional fraud.

 

Will HMRC investigate furlough fraud?

The HMRC are investing huge resources into investigating CJRS related fraud. This includes a well-funded enforcement unit consisting of 1,000 inspectors, which has launched over 12,000 investigations into abuses of the various business support schemes.

 

How do HMRC investigate furlough fraud

The HMRC are believed to be investigating covid fraud by prioritising high profile cases, and are actively following up on reports, whistle-blowing and tip offs.

The Finance Act 2020, which received Royal Assent in July 2020, provides enforcement powers to HMRC in investigating CJRS claims. These include the power to claw back CJRS payments made to businesses which they weren’t entitled to, or payments that were misused (i.e. not used to pay employment costs). It is also possible that an income tax liability can be imposed on those who have received a payment to which they were not entitled to.

For employers, the requirement to maintain business records for six years means that the HMRC have time to investigate all businesses which exhibit suspicious activity, or have been reported to them.

 

Should I report Suspicions of Furlough Fraud within the business to the HMRC?

If you are a current or past employee of the company, as a criminal offence of fraud this falls under whistleblowing. To be covered by the whistleblower legislation, the wrongdoing you disclose must be in the public interest (i.e. that it must affect others such as the general public).

If this is deemed to be the case, as a whistleblower you are protected by law and should not be treated unfairly nor lose your job in the process. Some companies have their own whistleblowing policy, so this should be your first point of call to see the processes that are already in place.

You must have evidence to support your suspicions to be covered by this legislation. Government guidance on whistleblowing for employers can be found here. [https://www.gov.uk/whistleblowing]

For further advice, feel free to contact a solicitor to discuss your specific situation.

 

Is furlough fraud a criminal offence?

In short, yes. A fraudulent claim under the Coronavirus Job Retention Scheme (CJRS; or the ‘Furlough Scheme’) is a criminal offence under the Fraud Act.

It can be considered ‘Fraud by False Representation’, whereby a person commits an offence by dishonestly making a claim under the scheme with the intention to make a financial gain for themselves or another. The intention can also be to cause actual or risk of loss to another individual or company.

If the person who submits the claim (whether they are the benefactor or not) knows that the submission is, or might be, untrue or misleading then fraud has been committed.

 

What will happen if I am found to have made fraudulent claims under the scheme?

Depending on the circumstances, if you have been caught making claims fraudulently the best possible outcome is being requested to repay the amount overpaid. It is possible that the HMRC may place criminal sanctions or financial penalties on the company, its directors or certain individuals depending on severity.

The HMRC may reserve prosecution for only the most serious of cases.

Penalties may include;

  • Prosecution costs
  • A requirement to repay overpayments made through the scheme
  • Disqualification of directors
  • An unlimited fine
  • 10 years imprisonment

 

What if I committed the offence through genuine mistake?

The Coronavirus Job Retention Scheme was, in part, created in reaction against extreme and pressing circumstances. Not only was this a new system, with nothing of its kind before, but much of the scheme was also continually developed during the first months of the pandemic. As such it is possible that employers have made a genuine mistake when claiming through the furlough scheme.

For employers who have used the scheme, it is essential that they audit and review previous claims and payments. Any mistakes should be reported to HMRC as soon as possible, arranging to repay of the overpayments if necessary.

All relevant business records should be retained for at least six years, as stipulated by the HMRC.

For employers who have overclaimed through an CJRS grant, a 90-day window of notification was introduced. This amnesty period was set out in the Finance Act 2020, receiving Royal Assent in July 2020. HMRC required employers to notify them of an overpayment by the latest of either;

  1. Ninety days after receiving the incorrect, or erroneous, furlough grant;
  2. Ninety days after the change in circumstances which resulted in the employer not being entitled to the grant they had claimed;
  3. 20th October 2020

Further information about the 90-day Finance Act 2020 amnesty can be found here.

 

What should I do if I committed furlough fraud?

If employers believe they may have unwittingly (or otherwise) committed furlough fraud, please get in contact with our furlough fraud defence solicitors. Employers who are able to demonstrate a genuine mistake may only be required to repay any overpayment to the HMRC.

Proactive legal representation early may help ensure a positive outcome.

 

Where can I find more information regarding the HMRC’s guidance to employers?

For more information, the HMRC have published two guidance notes.

 

If you wish for further information, or legal advice, regarding your personal situation or any allegations made towards you, please contact one of our leading (“Top Tier”) solicitors now.

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