Furlough fraud - Time is now ticking for the “correction window.” Can we help review your claims?

9th September 2020

The Government has indicated that around £35bn has so far been spent on furlough payments, with 1.2m employers using CJRS to furlough 9.6m jobs. HM Revenue and Customs has told MPs on the Public Accounts Committee that it estimates that 5-10% of furlough cash has been wrongly awarded which means that up to £3.5bn may have been lost to the Treasury as a result of fraud and error on furlough claims.

Independent consumer rights group, Which?, has reported on a recent survey which revealed that around two thirds of respondents continued to work for their employer after being placed on furlough, which is against the rules of the scheme. If these findings are representative of all employers using the CJRS, this could mean millions of fraudulent claims.

There is an HMRC hotline for reporting furlough fraud with 8,000 calls received so far. In total HMRC is investigating 27,000 ‘high-risk’ claims and this is thought to be just the tip of the iceberg. Investigations into suspected fraud has already begun, with HMRC writing to these employers to give them the opportunity to correct mistaken claims and repay excess amounts. One arrest has already been made.

HMRC's permanent secretary, Jim Harra, has stressed that these investigations are about intentional fraudulent claims and not human error: "What we have said in our risk assessment is we are not going to set out to try to find employers who have made legitimate mistakes in compiling their claims.” He continued: “Although we will expect employers to check their claims and repay any excess amount, what we will be focusing on is tackling abuse and fraud.”

HMRC has been sympathetic to the situation and the fact that these measures are new to everyone. There is also a 90-day correction window for those to rectify any incorrect claims and stated leniency to any employer who uses this window and returns the funds they claimed of their own accord. But time may be running out for some as the amnesty and opportunity to correct any mistake without fear of penalty, comes to an end on 20 October 2020, or within 90 days of receiving the grant, whichever is latest. It is also noticeably evident that once this window has closed, those employers which have not reconciled their claims may face hefty 100 per cent tax charge on the overclaimed amount, plus penalties. There is also potentially significant reputational damage. Directors of companies need to be aware that, if they know of breaches and the employer becomes insolvent, personal liability for the tax charge may result.

If you know you have claimed too much grant, there is guidance on how to amend current claims or notify on overclaims on the government website. If you are not sure but having doubts about your claims, then don’t leave it too late. Now is the time to check your claims and if wrong, correct before the window to escape penalties is firmly shut.

If you are still concerned, we are here to help you review your claims, as needed. Please contact Rachel Skells, Michael Greene or your usual Whittles contact.