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HMRC makes first furlough fraud arrest

HMRC made its first coronavirus job retention scheme arrest this week after an investigation unearthed a suspected £495,000 fraud – but could this be just the tip of the iceberg?

10th Jul 2020
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Tip of the iceberg
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HMRC began clawing back fraudulent CJRS claims with the arrest of a Solihull man after officers executed a search warrant. As a result, computers have been seized, and funds held in a bank account relating to the 57-year-old man’s business have been frozen. 

HMRC has also confirmed that a further eight people across the West Midlands have been arrested as part of this investigation.

The alleged CJRS fraud was not the only the Solihull man’s only crime, his arrest also related to a suspected multi-million-pound VAT evasion and alleged money laundering offences.

Richard Las, acting director of HMRC’s fraud investigation service, said the tax department “will not hesitate to act on reports of abuse of the scheme”.  

He added, “This is taxpayer’s money and any claim that proves to be fraudulent limits our ability to support people and deprives public services of essential funding.”

Las reiterated that HMRC has built steps to prevent mistakes and fraud happening in the first place, but encouraged anyone concerned about abuse of the scheme to report it to HMRC online. In addition, the furlough scheme has four lines of defence: 

  • Employees have to have been on payroll on or before 19 March to prevent the use of fake employees.
  • Secondly, claims are only accepted from employers HMRC has authenticated.
  • Thirdly, all claims are assessed by a specialist team within a 72-hour window; and 
  • HMRC takes proportionate and reasonable interventions with customers after the money has been paid.

Tip of the iceberg

But with £27bn paid out in CJRS claims and more than 3,800 reports of fraudulent claims already reported to HMRC’s online whistleblower hotline, this arrest could be the “tip of the iceberg”, says Blick Rothenberg’s Fiona Fernie.

“The government now intends to claw back as much money as possible from those whose claims were wrong. No-one who has received these grants should be complacent, the proposals for clawback are not confined to instances where the claim was fraudulent – it applies to cases where there has been a lack of proper care as well. Now is the time to ensure that claims under the CJRS are accurate.”

Blick Rothenberg’s Fernie added that the government is proposing that the grants are taxable, which means those not entitled in the first place would see the full amount of the grant subject to income tax at a rate of 100%.

“Given the number of changes there have been to the scheme since it was first introduced, there are likely to be a significant number of cases where people have inadvertently made incorrect claims and the repercussions could be long-lasting,” she said 

Detailed evidence

For this reason, Fernie reminded companies to ensure they have detailed evidence. She explained that HMRC can impose normal investigation due to treating the grant as taxable, meaning the tax authority will be able to assess the tax due within four years for an innocent error, six years for a careless error, and 20 years for a fraudulent claim.

“It is likely to be a major problem for some who are investigated and receive assessments. Once the assessment is issued, the burden of proof will be on the taxpayer to show that it is wrong,” said Fernie.

She added, “A combination of the lack of clarity in certain aspects of the detailed rules of the scheme, and the length of time which may elapse before an HMRC investigation is complete, may make it very difficult to prove entitlement to the grant. It is therefore vital that the accuracy of claims is considered now.”

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By SXGuy
14th Jul 2020 06:41

I'd hazard a guess and say this guy was on the radar for all the other fraud and just happend to have claimed furlough as well, which hmrc clawed back along with the rest. Title suggests it was a furlough raid when it probably wasn't.

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