How to Report Furlough Abuse to HMRC

The Coronavirus Job Retention Scheme (CJRS) was brought in at the height of the COVID-19 pandemic as an incentive to employers to keep staff members who they would have otherwise made redundant during the pandemic. The scheme ensured that around 9.6 million people had 80% of their income funded by the British taxpayer. While the CJRS has broadly been seen as having had a positive impact, the amount of money that it has cost is considerable. Some estimates put this at £14 billion per month, or around £70 billion by the end of October. And it is believed that this amount was made larger by fraudulent claims. In this article, we will review what is known about the scale of CJRS fraud, and what you can do if you want to blow the whistle on a person who has claimed from the scheme when they were not entitled to do so.

CJRS fraud was Inevitable from The Start

CJRS fraud was widely foreseen from the very start. Given the speed by which the CJRS IT system was implemented, and the lack of evidence required at the time of making a claim, it was an easy way for less scrupulous individuals to steal vast sums of money. This was confirmed in June 2020 when the HMRC’s chief executive, Jim Harra, told the Commons Public Accounts Committee that the CJRS was "a magnet for fraudsters".

It is easy to see why the system was so open to abuse. The implementation of the CJRS needed to balance the speed of availability with effectiveness, but in doing so, could not be overly complex. Rather than requiring lots of evidence and documentation, the system worked on an assumption of trust and self-regulation. It was a case of acting quickly, knowing that HMRC would need to deal with any misuse down the line.

Cases of CJRS Fraud on the Rise

Unfortunately, but not unexpectedly, cases of CJRS fraud are now coming to the fore. In one case of suspected CJRS fraud, in July 2020, a man from Solihull was charged with defrauding the scheme of £495,000. According to the BBC, “The man was also arrested - along with a further eight men from across the West Midlands - in relation to a separate suspected multimillion-pound tax fraud and alleged money laundering offences”. In another possible case of CJRS fraud, a 43-year-old man and a 51-year-old woman from northeast London were arrested in September for allegedly taking £70,000 from the scheme.

Back in July 2020, the HMRC estimated that it had received over 4,400 reports of potential CJRS fraud, however, this number is now likely to be much larger.

How will the HMRC Handle Cases of Overpayment of CJRS Funds?

At the end of July, HMRC published guidance on how it would handle grant overpayments, entitled, ‘Penalties for not telling HMRC about Coronavirus Job Retention Scheme grant overpayments - CC/FS48’. The guidance confirms a CJRS grant may have been overpaid if:

• you were not entitled to receive the grant
• you were no longer entitled to keep the grant after your circumstances changed - for example, if you continued to receive a CJRS grant for an employee after they left your employment

It also states, “We understand that mistakes can happen, particularly in the present circumstances. We’ve made it as easy as possible to pay back any amounts of CJRS grants you’ve claimed that you were not entitled to. If you received too much because you made an error in a claim, you must pay this back to us. It’s easy to put right. You can tell us about an overclaimed amount in your next online claim without the need to call us”.

There is also a timeframe which applies for informing HMRC of any overpayment of CJRS. If you do owe money back to the HMRC, you can either correct the amount in your next claim (hence correcting the balance) or if you are not making any further claims, pay the HMRC within 30 days. If you miss this deadline, you still have time to tell HMRC without incurring a penalty:

• Within 90 days of the date you received the grant you were not entitled to, or;
• Within 90 days of the date you received the grant that you were no longer entitled to keep because your circumstances changed, or;
• By 20 October 2020

Where an amount is still outstanding, the HMRC will recoup what they are owed when assessing your tax liability. The guidance states that the assessment will include:

• any amounts you’ve not used to pay furloughed employees’ wages
• related costs within a reasonable period

It also states that you must pay any amount within 30 days of the assessment. In addition, HMRC may also charge a penalty for not informing them of any overpayment. Crucially, the guidance also states, “If you knew you were not entitled to your grant and did not tell us in the notification period, the law treats your failure as deliberate and concealed. This means we can charge a penalty of up to 100% on the amount of the CJRS grant that you were not entitled to receive or keep”.

Final words

If you believe that a person or business has possibly committed CJRS fraud, you can inform the HMRC online or by phone. It is recommended that you check the HMRC website for guidance on this matter. The HMRC website also explains that in the interests of your safety, if you are considering making a report of fraud, you should not try to find out more about the fraud, let anyone know you are making a report, or encourage anyone to commit a crime so you can get more information. The online form also does not require you to enter your personal details, hence allowing you to make an anonymous report if you would prefer to do so.