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Rishi Sunak, Chancellor of the Exchequer
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Government writes off £4.3bn in stolen Covid payments

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Almost £6bn in public money has been erroneously paid out in coronavirus support, and the government expects to recover just £1 in every £4 after admitting more than £4bn may have been lost to fraud.

20th Jan 2022
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The Treasury expects to recover just a quarter of the £5.8bn lost to fraud and error across multiple Covid support schemes.

It has revised down the amount it hopes to claw back by 2023, predicting only £1 of every £4 in support payments claimed by those who were not entitled will return to the public purse.

However, industry experts told AccountingWEB their warnings ahead of time fell on deaf ears as the government pressed ahead with inferior technology and outdated processes that played straight into the hands of fraudsters.

How much has been written off?

HMRC admitted it expects a maximum of £1.5bn will be returned by the end of the next financial year in a document intended to dispel “myths, misconceptions and inaccurate stories or claims” about its work.

It said an estimated £5.8bn in support grants was paid out to fraudsters via schemes including the Coronavirus Job Support Scheme (CJRS) and the self-employed income support scheme in 2020 and 2021.

The Treasury has written off approximately £4.3bn, despite creating an anti-fraud taskforce of around 1,200 employees dedicated to chasing down suspect claims paid out during the pandemic.

“Difficult to recover”

The £1.3bn to £1.5bn it anticipates recouping is significantly less than the £2.3bn HMRC permanent secretary Jim Harra said in November that his department predicted to hit. Harra was grilled by the Public Accounts Committee on Monday as MPs reacted to the scale of the projected losses.

“Nothing has been written off,” Harra told the PAC. He later added, “The [£4.3bn] figure is inaccurate,” as it is the product of an estimate, “but nevertheless, it is the case that a significant proportion of the amount lost to error and loss we suspect will be very difficult to recover.”

Harra explained that HMRC had fraudulent claims worth about £380m, prevented payment of a further £304m before it was made, and there was one payment that escaped the tax department worth £26m, which HMRC managed to stop in the bank account.  

“Shocking failure”

Last year, HMRC said the taskforce was expected to recover £1bn in fraudulent or incorrect claims over the next two years. At that point it had more than 23,000 investigations open. The CJRS, which ran from March 2020 to September 2021, enabled employers to claim some of the wages owed to employees who could not work their full contracted hours due to pandemic restrictions.

Stories of errors and clear fraud soon emerged, with unscrupulous businesses claiming furlough cash despite also having their employees working.

Shadow chief secretary to the Treasury Pat McFadden told MPs that the government’s target of recovering a fragment of the stolen funds was tantamount to “giving up easily”.

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Replies (49)

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LL
By RickyRoark
20th Jan 2022 12:19

I particularly enjoyed this line: "...the government pressed ahead with inferior technology and outdated processes that played straight into the hands of fraudsters"

If HMRC were serious about tax evasion and mismanagement of public resources, one would think prioritising solving issues like this would be more manageable and time-efficient than pressing ahead with projects like MTD.

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Replying to RickyRoark:
RLI
By lionofludesch
20th Jan 2022 17:04

RickyRoark wrote:

I particularly enjoyed this line: "...the government pressed ahead with inferior technology and outdated processes that played straight into the hands of fraudsters"

If HMRC were serious about tax evasion and mismanagement of public resources, one would think prioritising solving issues like this would be more manageable and time-efficient than pressing ahead with projects like MTD.

Technology ? It's people that they need.

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Replying to lionofludesch:
Tornado
By Tornado
22nd Jan 2022 13:29

"Technology ? It's people that they need."

I completely agree with that but I would say "trained people with responsibility".

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By cbp99
20th Jan 2022 12:54

I was interested in Harra's assertion that "The [£4.3bn] figure is inaccurate, as it is the product of an estimate". Like the so-called tax gap.

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Replying to cbp99:
RLI
By lionofludesch
20th Jan 2022 17:01

cbp99 wrote:

I was interested in Harra's assertion that "The [£4.3bn] figure is inaccurate, as it is the product of an estimate". Like the so-called tax gap.

Ah well, if it's like the tax gap, there's probably nothing missing at all.

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By SteveHa
20th Jan 2022 13:48

Perhaps if HMRC were adequately funded, staffed and trained they might recover more.

Thanks (7)
Replying to SteveHa:
By ireallyshouldknowthisbut
20th Jan 2022 13:59

Perhaps if our political elite were not so inept and actually listened to experts at the time rather than rushing stuff through on a Friday afternoon they would have not paid out as much either....it was obvious on the loans for example the second they were announced that with no skin in the game the banks would just take their (substantial) admin fee and hand out the cash to anyone who asked.

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Replying to ireallyshouldknowthisbut:
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By Hugo Fair
20th Jan 2022 16:54

There's only one word with which I'd quibble in your "actually listened to experts at the time" ... it was practitioners they needed to listen to, not so-called experts.
Judging by the article the only qualification for the label of 'expert' is to have your own barrow-full of wares to promote - which is exactly how this govt managed to squander so much money via cronies (ably supported by such experts)!

There's always a LOT more that could (and maybe should) have been done at the time - and a greater proportion of funds/resources being invested in longer-term infrastructure would be a help - but the big/glaring mistakes would have been avoided by simply inviting a dozen practitioners round for tea & discussion.

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Replying to Hugo Fair:
By SteveHa
21st Jan 2022 09:45

Hugo Fair wrote:

but the big/glaring mistakes would have been avoided by simply inviting a dozen practitioners round for tea & discussion.

Surely you mean Cheese and Wine.

Thanks (5)
Replying to SteveHa:
RLI
By lionofludesch
21st Jan 2022 10:56

SteveHa wrote:

Hugo Fair wrote:

but the big/glaring mistakes would have been avoided by simply inviting a dozen practitioners round for tea & discussion.

Surely you mean Cheese and Wine.

[Chuckle]

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Replying to ireallyshouldknowthisbut:
Morph
By kevinringer
21st Jan 2022 12:48

ireallyshouldknowthisbut wrote:

Perhaps if our political elite were not so inept and actually listened to experts at the time rather than rushing stuff through on a Friday afternoon .....


But they have to rush everything "Friday afternoon" through because they have the weekly Downing Street lockdown party to attend.
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Scooby
By gainsborough
20th Jan 2022 15:56

So easy to write-off payments when it's not your own money. Far easier to target those genuine businesses struggling to survive in this climate with MTD and pointless red tape. Fuming.

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By Hugo Fair
20th Jan 2022 17:02

So ... fundamentally they don't know how much of the total claimed was fraudulent - and anyway have no effective plan for tackling those claims (after the event) and so lack optimism about getting much back (and are certainly not prepared to announce a target against which they'd be seen to fail).

And yet, a clear handle on precise figures is what they expect from taxpayers!

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By Justin Bryant
20th Jan 2022 17:33

Compare HMRC's time and resources spent on the loan charge (absolutely colossal) with HMG's resources spent here (or rather not spent here) on simple anti-fraud measures and then compare & contrast the respective financial and other outcomes.

This is what inevitably happens when you are a politician or civil servant responsible for managing/spending other people's money with no accountability to speak of i.e. complete & utter incompetence and mismanagement.

And what about this from the link below re tax fraud?

"Collecting what is owed
Whatever approach we take, we always seek to recover the money owed."

https://www.gov.uk/government/publications/hmrc-issue-briefing-hmrcs-app...

Who are they kidding?

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Replying to Justin Bryant:
the sea otter
By memyself-eye
21st Jan 2022 09:47

Time spent?
not just the loan charge - IR 35 nonsense absorbs a huge amount of time too!

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Replying to memyself-eye:
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By Justin Bryant
21st Jan 2022 10:29

Yes; my point was basically that you can take your pick from 100s if not 1,000s of similar examples to demonstrate this total incompetence that would never arise in the private sector (with the exception of large banks obviously that are mostly run by psychopaths) where there is at least some degree of proper management and accountability over very large sums of money.

It's a pity HMG can't be bothered to claim back all those fraudulently claimed Covid billions dished by Rishi - or at least some of them - which could also pay for lots of hospitals, schools and vital public services that the pro-LC brigade here constantly bang on about irrelevantly in their support of the latter whilst bizarrely being fairly apathetic and indifferent about the former is my other point.

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Replying to Justin Bryant:
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By Hugo Fair
21st Jan 2022 10:18

So with the govt printing money (and handing it out) 'on demand' and the security of the underlying control mechanisms in the hands of psychopaths ... there's nothing else to worry about and we can all sleep easily then? :=)

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Replying to Hugo Fair:
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By Justin Bryant
21st Jan 2022 10:24

All power corrupts etc., so you will never change any of that. It's just a given.

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Replying to Justin Bryant:
By Duggimon
21st Jan 2022 10:31

To be fair the issue around the loan charge is about tackling aggressive tax evasion and is absolutely an area where HMRC have to focus, though I agree not to the detriment of tackling other fraud.

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By Hugo Fair
21st Jan 2022 10:13

And if *you* feel helpless in the face of all this fraud, today's FT has short article with the title:
"Judge says criminal gang ringleader's state bounceback loan 'defies belief'"

A judge has demanded an explanation for how a "ringleader" in an organised crime gang with 48 previous criminal convictions obtained a £50,000 government coronavirus bounceback loan.
Judge Anthony Cross QC said that he required an explanation from "the relevant body" within 14 days over how the loan, as well as two other bounceback loans taken out by a fellow gang member, had been obtained. "Here the most basic of checks would have revealed the fraud", he said.
Hussain made a £50,000 written application for a loan in May 2020 and received the money to his bogus company just seven days later, the court heard.

If a QC can't identify "the relevant body" from whom to obtain an explanation, then ...

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Replying to Hugo Fair:
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By Justin Bryant
21st Jan 2022 10:27

Judges don't live in the real world. We do. The only astonishing thing here to all of us is that there was not even more such brazen simple BBL fraud.

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By farrcorfe
21st Jan 2022 10:23

It really is about time that Jim Harra was given 'the soldier's farewell'.

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By Nebs
21st Jan 2022 10:45

To reduce tax evasion put the policing in the hands of the private sector on a commission basis. Ditto these covid payments.

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Replying to Nebs:
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By Justin Bryant
21st Jan 2022 10:51

Yes; I am very confident indeed that if HMG paid me £1m I would find at least £1bn of additional tax fraud/evasion/ineffective avoidance (I'm not saying I could help recover it all).

They pay tax fraud informers, so why not also people like me offering such a service?

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Replying to Justin Bryant:
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By Hugo Fair
21st Jan 2022 11:01

And even better (from HMG's perspective if not yours), the law of supply & demand would kick in ... so your generous offer might end up being undercut in competition!

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By meadowsaw227
21st Jan 2022 10:58

It would be very interesting to see exactly who and where these loans have been given to.
A list of all defaulters should be available for the public to see .
All my clients except 1 have paid back the loans , the one is actively paying it off after a talking to by me.
Accountants could help with getting some of the miscreants brought to book, rather than saying HMRC and the government are to blame and not doing anything

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Replying to meadowsaw227:
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By tedbuck
24th Jan 2022 10:57

Could just be that the miscreants don't have accountants - you don't have to these days - have you looked at some of the rubbish filed on Companies House which has just been accepted by them. I suspect the same applies to HMRC - after all if it is submitted online who is going to look at it - it must be right it's digital.

And Companies House wonderful system where everything is protected by being online so that when your company has been stolen and the Registered Office changed you can do nothing about it. Even a letter to the CEO of Companies House achieves nothing because she doesn't reply.

If its a government body these days it's rubbish - DVLA, HMRC, NHS and on and on. I'm afraid there is little hope for the taxpayer.

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Replying to tedbuck:
Tornado
By Tornado
24th Jan 2022 11:24

What you say is sadly the truth.

I have been trying to use information drawn into my Tax Return templates by TaxCalc through API's and much of it is rubbish. Where there is any information, gross salaries are under one employer and the tax deducted is shown under an unknown employer. I am finding that notifications online to HMRC about changes of address are either being ignored or income case the address was not changed but there was a note that the address was changed but no sign of the new address details.

There are myriad other examples across Government departments like this and the obvious conclusion is that the Government's databases are slowly being corrupted by false data and once this sort of degradation of data starts, it is very, very difficult to correct.

The odds must be now 100% against MTD for ITSA being introduced in 2024 whilst at the moment we have an IT system for taxation that cannot even handle the basics yet alone the extreme complexities that MTD demands.

It could all be treated like a big joke if the consequences were not so deadly serious. It simply does not work.

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By markabacus
21st Jan 2022 11:13

Just hope they are as understanding to those genuine taxpayers who made claims at the time believing them to be correct but subsequently are judged by HMRC to have over claimed.

They can't catch the fraudsters but they will no doubt come down hard on the innocent mistake

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By johnjenkins
21st Jan 2022 11:49

The original estimate of covid was £330b (this is what Government said they were putting aside). I said at the time it would be nearer £1.5t once it's done and dusted. When you think of lost revenue, it's not only fraud, it's business going down the pan etc.
The other thing many forget is that the whole world was in turmoil with this and not knowing what to do, who to believe etc. So hindsight is truly a wonderful thing. It means we can blame whoever we like without fear of being wrong.

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By North East Accountant
21st Jan 2022 11:52

It beggars belief that on an enquiry case HMRC can nitpick over a £37 deduction for someone earning over £100K per annum (real case) and yet throw billions out the door with no checks.

HMRC don't really care about fraud though as they do practically nothing to stop the black economy which costs the country a fortune in lost tax.

MTD ITSA will just drive this through the roof as people disengage from the tax system (too complex) and carry on regardless.

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By DMBAcc
21st Jan 2022 12:32

And this bunch have the gall to tell me to digitalise my clients for NO BENEFIT whatsoever, rather we will see how they can really screw things up. HMRC think that MTD for IT will all be plain sailing. So let me be clear with an example. An intelligent person trained in Clearbooks presents me with her end of year accounts. So I produce a TB as a basis for a full accounting report. I spend a day reconciling the bank accounts and PayPal. Now this is in a system where bank statements are downloaded although PayPal is still a manual transfer. Yep 8 solid hours just to get the TB correct. Only to find duplications all over the place when inspecting the revenue account. So loads of corrections needed. I repeat a highly intelligent person but NO formal accounting training, using one of the more straightforward accounting packages HMRC would be expecting sole traders to use. I think the phrase is "not a cat in hell's chance"

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Replying to DMBAcc:
RLI
By lionofludesch
21st Jan 2022 12:26

DMBAcc wrote:

And this bunch have the gall to tell me to digitalise my clients for NO BENEFIT whatsoever, in order that they can really screw thing up. HMRC think that MTD for IT will all be plain sailing. So let me be clear with an example. An intelligent person trained in Clearbooks presents me with her end of year accounts. So I produce a TB as a basis for a full accounting report. I spend a day reconciling the bank accounts and PayPal. Now this is in a system where bank statements are downloaded although PayPal is still a manual transfer. Yep 8 solid hours just to get the TB correct. Only to find duplications all over the place when inspecting the revenue account. So loads of corrections needed. I repeat a highly intelligent person but NO formal accounting training, using one of the more straightforward accounting packages HMRC would be expecting sole traders to use. I think the phrase is "not a cat in hell's chance"

The proliferation of ways to pay folk is indeed part of the underlying problem.

Remember when it was cash or cheque ?

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Replying to lionofludesch:
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By Hugo Fair
21st Jan 2022 13:07

And not just the multitudinous 'channels' through which your money flows (from challenger banks to on-banking cards to digital-only apps) - which are at least denominated in national currencies - unlike cryptocurrencies.

BTW, I wonder how much of the billions of fraudulently claimed Covid handouts was quickly transferred into a cryptocurrency (on one of many platforms)?

I would have done that in their shoes ... initial cost to me of funds was zero, so risk quotient can be almost infinite without affecting risk/reward ratio decisions.
And the near impossibility of tracking transactions (let alone reclaiming from blockchain wallets) means it's probably those BBLs that have driven up the price of bitcoin et al.

A startlingly effective use of the double-whammy by HMRC!

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Morph
By kevinringer
21st Jan 2022 12:54

1. Heads should roll within HMRC/Government for ignoring warnings and those responsible should be named.
2. Lists of defaulters should be published.
3. HMRC should scrap its vanity projects such as MTD and focus on getting this money back and getting its own house in order.
4. I should be given a knighthood for giving such wonderful advice.

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Replying to kevinringer:
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By johnjenkins
21st Jan 2022 13:06

Well if Piers ain't getting one why should you?

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By moneymanager
21st Jan 2022 14:16

They had no problem in denying thousands on technicalities, the too recently but genuinely self-employed, SME directors drawing divis, we had may rental units empty for months because of foreign student "repatriations", we were allowed to roll up our own debt (thanks a lot Rishi) and got to pay Council Tax and with ZERO assistance but plenty of threats, do this lot seriously expect to be taken seriously?

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By moneymanager
21st Jan 2022 14:22

This admission has an important and distracting consequence, on our behalf the government has spent and continues to spend tens of billions on things that weren't ever needed (Nighingale hospitals) and have been proven not to work, jab1, jab 2, jab 3 and, in Israel at least, jab 4, I want my money back.

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Replying to moneymanager:
RLI
By lionofludesch
21st Jan 2022 18:31

moneymanager wrote:

This admission has an important and distracting consequence, on our behalf the government has spent and continues to spend tens of billions on things that weren't ever needed (Nighingale hospitals) and have been proven not to work, jab1, jab 2, jab 3 and, in Israel at least, jab 4, I want my money back.

I'm not sure about Nightingale hospitals. If I'd been badly enough to go to hospital, I wouldn't have taken kindly to "Sorry, we've no beds left - we were going to build a Nightingale Hospital but moneymanager said he reckoned we wouldn't need it."

Easy to be wise in hindsight.

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Replying to moneymanager:
Morph
By kevinringer
22nd Jan 2022 09:32

There's a huge difference between the jabs/Nightingales and the Covid funding. At the Nightingales were setup I don't remember strong opposition. I think most people were reassured the Nightingales had been built and most people were impressed with how quickly they were put in place. Most of us expected them to be needed. In the end they weren't. That does not mean they should not have been built. Even though some were never used, they weren't a waste of money because lessons were learned which will help if we need to do something quick on a large scale in future. Covid business funding is different because there were plenty of advisors and consultants warning the Government/HMRC of the fraud risks before the money was handed out, but the Government/HMRC felt getting the money out was more important. Maybe they were right: maybe if extra checks had been put in place more businesses would have gone to the wall before the funding arrived and maybe the cost of losing those businesses would have been more than the cost of fraud. I don't know.

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Replying to kevinringer:
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By tedbuck
24th Jan 2022 11:01

Take your point but they had no staff to man them and still don't.

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By Dr Fauci
21st Jan 2022 15:22

More than happy to help recover this for HMRC at no upfront cost, just a 1% success fee for each fraud identified and successfully recovered.

Why can't this be outsourced? Are they afraid something might be discovered that they would prefer the public not to know about?

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Replying to Dr Fauci:
Morph
By kevinringer
21st Jan 2022 16:18

1% would be substantial revenue so a huge incentive, and as it would still result in 99% of what is collected being returned to the Government, it would be good value for money for the taxpayer. You've got the job.

HMRC outsource collection of normal tax debts, but that system plods along like everything HMRC and is hardly fit for purpose and is completely inappropriate for collecting payments obtained fraudulently.

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By Dr Fauci
21st Jan 2022 15:29

Duplicate

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Replying to Dr Fauci:
Morph
By kevinringer
21st Jan 2022 16:13

Quadruplicated. You certainly give value for money.

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Tornado
By Tornado
22nd Jan 2022 13:34

It seems to me (and probably many others) that crime does indeed pay.

Where's Jack Regan and George Carter or even Gene Hunt "Fire up the Quattro and let's get these villains"

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By matthew kolmer
26th Jan 2022 15:28

My small catering company was completely closed during covid and having 5 yrs worth of books i app,lied and took covid relief . As the pandemic went on i took a part time delivery job and still claimed covid grants. Does this mean i have fraudulently claimed ?

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Replying to matthew kolmer:
RLI
By lionofludesch
26th Jan 2022 15:53

matthew kolmer wrote:
..... i app,lied and took covid relief .

Unfortunate positioning of the comma there.

What grants did you claim ? What do you mean by "company" ? People use the term far too loosely.

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