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£3.5bn furlough payments lost to error or fraud

Up to £3.5bn in deliberate fraud or error could have been paid out in the furlough scheme, HMRC’s chief Jim Harra has confirmed to the Public Accounts Committee (PAC).

8th Sep 2020
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Jim Harra speaking in front of the PAC
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During a televised virtual hearing on Monday that also covered the loan charge and the Eat Out to Help Out scheme, Harra revealed that between 5% to 10% of the £35.4bn furlough grants could have been paid out as a result of deliberate fraud or error.

Furlough fraud and error

Under questioning from Conservative MP Richard Holden, Harra calculated the margin of fraud and error as ranging between £1.75bn and £3.5bn.

“We are not going to try and find employers who have made mistakes in compiling their claims because this is obviously something new that everybody has to get to grips with in a very difficult time,” he said. “We will expect employers to check their claims, and repay any excess amounts, but what we will be focused on is tackling abuse and fraud.”

Since the Finance Act received Royal Assent in July, Harra told the MPs that HMRC has power to claw back grants employers are not entitled to.

Employees who feel their employer is not complying with the scheme are encouraged to report the fraud confidentially on GOV.UK. This fraud hotline has already received 8,000 calls. Harra explained that this information will be used to risk assess employers for compliance action.

In addition, HMRC identified 27,000 high risk claims that “look out of step”. The department is currently making enquiries into 11,000 those claims.

Harra added that although there were some prepayment controls designed to prevent fraudulent payments, the system was not designed to hold up payments to legitimate employers where there might be concerns about the amounts involved.

“The first step is to contact those employers to give them an opportunity to correct their claims, but if they do not do so then we do have the resources to look into that,” said Harra.  

Fiona Fernie, a disputes resolution partner at Blick Rothenberg, questioned whter the “missing” £3.5bn was just the tip of the iceberg.

“This figure is purely an estimate and has been issued just a couple of weeks after HMRC issued the first 3,000 letters to firms asking them to check the amounts that they had claimed and warning them that they were under investigation,” she said.

“With many more businesses already under review with a view to investigation, it remains to be seen whether the estimate is accurate.”

HMRC is writing to employers to root out fraudulent CJRS claims and those abusing the system. The first letters landed on employers’ doormats on 18 August. 

Eat out to help out

The PAC chair MP Meg Hillier also challenged Harra over the letter he wrote to the Chancellor questioning the value for money of the eat out to help out scheme.

Due to the speed with which the Covid support scheme was developed, Harra said HMRC simply did not have the time to do the analysis that you might normally wish to do for launching a policy of this scale. So, he was unable to “determine counterfactuals that enable you to arrive at a value for money judgment” and for this reason, there was “significant uncertainty as to whether a policy will be value from money”.

Without enough time to gather further evidence, Harra told the committee that under the Treasury guidelines he had to seek a direction. Now the scheme has ended, Hillier asked Harra if HMRC had analysed the costs and benefits.

“There’s already clear evidence that the scheme achieved its objectives in terms of reassuring the public about it being safe to go into restaurants and helping restaurants to recover from the lockdown period. However, there’s obviously much more work to do to evaluate its outcomes aside from money.”

He added that HMRC and the Treasury are discussing how they will carry out a post-implementation evaluation of all the Covid-19 schemes, focusing on their implementation, whether they achieved their objectives, the value for money and the levels of error and fraud. But no timetable has been set yet for these reviews.

Loan charge

Meanwhile, Harra passed the baton to Penny Ciniewicz, HMRC’s director general for customer compliance group, to update the PAC on the loan charge and the thousands of taxpayers who have until the 30 September to make a settlement.

Around 6,000 individuals are in active settlement conversations with HMRC before the deadline, Ciniewicz confirmed.

HMRC estimated that around 50,000 individuals were affected by the loan charge. Ciniewicz said 11,000 taxpayers were taken out by the changes following Sir Amyas Morse’s December report. HMRC has written to the 12,000 left to settle. 

The HMRC director estimated that 6,000 are “actively in the process of conversations” with the tax department and may settle, while a further 2,000 have already settled or were taken out the scope.

A small number of individuals have also asked paused conversations with HMRC due to Covid-related issues. But she added that 3,000 individuals left have not responded to HMRC’s letters or have missed deadlines. “It may be tricky for them to settle before the 30th of September,” she said.

MP James Wild, who pursued the loan charge questions, asked about the fairness of the process. “I’ve had constituents having problems getting hold access to physical copies of inquiry notice, for example, with staff are working as they can’t get them.”

Ciniewicz said HMRC has been “communicating with customers for some time now to help them” and have around 1000 staff working on the loan charge settlements.

But when asked if HMRC has the power to extend the deadline, the HMRC director said “the legislation sets out the 30 September is the deadline and we can't adjust that deadline.”

Replies (44)

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By patrickcb
09th Sep 2020 09:39

All the Government had to do here was to mandate that CJRS claims had to be either made by and/or signed off by a member of one of the chartered accountancy bodies. There are crooked accountants who could have made fraudulent claims on behalf of clients, but they are few and far between.

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Replying to patrickcb:
By Duggimon
09th Sep 2020 09:56

Yes of course, as a member of one of the chartered accountancy bodies I can provide a guarantee all the claims filed on behalf of my clients are 100% accurate.

I am able to provide this guarantee because, as a member of a chartered accountancy body, I spend all my time driving between clients' premises checking to see who's working each day to ensure all the information on the claim form is 100% accurate.

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Replying to Duggimon:
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By Red1960
09th Sep 2020 12:37

So gratuitous insults without any factual basis are something one might expect from you, your practice and indeed your accounting body?

As a member of an accounting body I would wish to dissociate myself from such spurious comments.

From personal experience I, like anyone else in the profession, can absolutely guarantee that there are chartered accountants who have knowingly made false claims. The same can be said of certain colleagues who are not members of chartered bodies.

Being chartered is no guarantee of honest or integrity as any fool should know.

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Replying to Red1960:
By Duggimon
09th Sep 2020 14:34

I agree with you entirely, I think we're on the same side, I was lampooning the idea that:

"All the Government had to do here was to mandate that CJRS claims had to be either made by and/or signed off by a member of one of the chartered accountancy bodies."

which as both you and I recognise, is a ridiculous thing to say. Chartered, accountants, along with members of other professional accountancy bodies, are entirely capable of mistakes and of dishonesty, as are "unqualified" or "unregulated" accountants, and taxpayers themselves. Laying the blame at the door of one group entirely is a gross and unwarranted simplification.

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Replying to Red1960:
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By Paul Crowley
11th Sep 2020 16:46

Duggimon's point well made.

Only the employees and employer know if the employee worked.
Several posts on this issue already exist.

I personally submitted lots of claims but cannot know if they are fraudulent of not. All I do is make sure the numbers are correct

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Replying to patrickcb:
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By Casterbridge Hardy LLP
09th Sep 2020 10:16

Why only "a member of one of the chartered accountancy bodies" is there something wrong with members of other regulated bodies?

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Replying to patrickcb:
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By Ian McTernan CTA
09th Sep 2020 13:08

I don't belong to a chartered accountancy body. I belong to the CIOT. Perhaps we should mandate that anything connected with tax should only be done by qualified members of a taxation body? (I'm being sarcastic here for those who didn't notice).

Your comment is wrong on so many levels- there are plenty of accountants out there who still think they can do everything (rather than get help) and make a complete mess of things. Equally there are many 'non-qualifieds' who do a much better job than you or I.

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Replying to patrickcb:
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By Open all hours
09th Sep 2020 14:58

I understand that Harold Shipman was very well qualified.

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Replying to patrickcb:
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By Open all hours
09th Sep 2020 15:01

Why is it so easy to duplicate posts on here? When it’s gone why didn’t it go?

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By Paul Crowley
11th Sep 2020 16:48

Looks as if a couple of typos

“We are not going to try and find employers who have made mistakes in compiling their claims because this is obviously something new that everybody has to get to grips with a very difficult time,” he said. “We will expect employers to check their claims, and we repay any excess amounts, but what we will be focused on is tackling abuse and fraud.”

We before repay looks odd.

Edit
Now edited

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By johnjenkins
09th Sep 2020 09:51

It is a forgone conclusion that when you have a system that is drawn up fairly quickly in order to help in times of crisis, abuse will happen. I'm sure the Government realised at the start. It is not only furloughed people, it is also the self employed that worked during lockdown and claimed money.
When Boris set aside £330b for the covid crisis, these sort of things were built in.
Look at it another way. The money the Government saved by not paying out to some that needed it (the losers in this) is probably equal to or even greater than the fraud and error figure.

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Replying to johnjenkins:
By Duggimon
09th Sep 2020 09:57

There's nothing in the rules for the self employed income support scheme that prevents people from carrying on working.

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Replying to Duggimon:
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By johnjenkins
09th Sep 2020 10:13

Check out the word "adverse"

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Replying to johnjenkins:
By Duggimon
09th Sep 2020 10:35

Check out your own post where you said self employed people who carried on working were making fraudulent claims.

Adversely affected doesn't mean unable to work and if you've been advising clients that it does then you're in a spot of bother I fear.

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Replying to Duggimon:
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By johnjenkins
09th Sep 2020 10:45

I didn't say they were unable to work. You should read my post and what the criteria for claiming is properly.

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Replying to johnjenkins:
Stepurhan
By stepurhan
09th Sep 2020 11:24

I don't know what you think you wrote but, unless you edit it after this, your post simply talks about the self-employed claiming while continuing to work as if that was abuse of the system (it wasn't unless they failed to meet other criteria as well). No mention of adverse or the other criteria for the self-employed to claim.

If you meant something different, you should have chosen your words more carefully instead of berating others for your failure to be clear.

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Replying to stepurhan:
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By johnjenkins
09th Sep 2020 14:15

Maybe you should also read the criteria for claiming. I thought it would be obvious if you weren't working then a claim could be made, but then I am dealing with some people who don't understand the words in the rules.

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Replying to johnjenkins:
By Duggimon
09th Sep 2020 14:36

johnjenkins wrote:

Maybe you should also read the criteria for claiming. I thought it would be obvious if you weren't working then a claim could be made, but then I am dealing with some people who don't understand the words in the rules.

Perhaps you should just explain what you meant by
"it is also the self employed that worked during lockdown and claimed money."
because I took that phrase to mean you saw something wrong with self employed people claiming grants while continuing to work.

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Replying to Duggimon:
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By johnjenkins
09th Sep 2020 15:00

Obviously if there is no work then you can claim. I think we all agree on that one.
It is when you work, and the income has not adversely affected your business and you claim, then you're in dodgy ground, which I'm sure HMRC will pounce on.
I have a client who used to work 6 days a week. He now works 5 days a week, but his business has not been adversely affected by this change although his income is down and therefore he claimed (his choice). There will be many scenarios like this that HMRC will see as abuse. There will be many who say that if income is down then the business has been adversely affected. Not so.

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Replying to johnjenkins:
By cfield
09th Sep 2020 16:26

They really should have put the onus on the self-employed to quantify the adverse impact and state how many hours they were working compared to last year. That would have vastly reduced the cost and made it much fairer. The way they did it was pig in trough time. Anyone can claim an adverse effect. They should have been made to prove it if they wanted the free hand-out. It would have been so much easier to detect fraud afterwards too.

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Replying to cfield:
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By johnjenkins
10th Sep 2020 09:22

This could be very difficult for some. We have clients whose income go up and down each year, depending on the contracts. So, in fact, it could be very difficult to work out if covid had reduced their income in that period or it was just a natural occurrence. The whole point I was making is that HMRC have gained and lost so they should leave well alone and concentrate on other things but then any excuse to look into tax payers affairs eh.

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Replying to johnjenkins:
Stepurhan
By stepurhan
14th Sep 2020 09:05

johnjenkins wrote:

Maybe you should also read the criteria for claiming. I thought it would be obvious if you weren't working then a claim could be made, but then I am dealing with some people who don't understand the words in the rules.

I am well aware of the criteria.

Your original post did not mention the criteria. It simply implied that self-employed people who continued to work were abusing the system. If you were aware of the criteria, you would also be aware that ceasing to work was not part of them for the self-employed.

As I said in my original post, I was commenting on what you wrote. If you meant that self-employed people who had not met the criteria (which, I repeat, did not include ceasing work) had abused the system, then you should have said that.

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Replying to stepurhan:
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By johnjenkins
14th Sep 2020 09:27

Wrong again, Stepurhan. Do read my post in its entirety a few times and you might, just might, get what I was saying. In case you still can't grasp it, I will endeavour to explain. The article is about furloughed people abusing the system. I was merely pointing out that it's not only the furloughed who have abused the system. When I post stuff I do tend to think that the people who read these posts have a modicum of insight as to what these posts mean. The crux of the matter is that HMRC will go after anyone who THEY feel have abused the system, regardless of the circumstances, being 1p or £5000.

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Replying to johnjenkins:
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By Paul Crowley
11th Sep 2020 16:49

1p the wrong way is adverse
No quantum specified

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Replying to Paul Crowley:
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By johnjenkins
14th Sep 2020 09:27

Really?

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Replying to Duggimon:
By cfield
09th Sep 2020 12:46

Nor the CJRS scheme actually, provided you were working for yourself or a different employer.

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Replying to johnjenkins:
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By Red1960
09th Sep 2020 12:27

The simple fact is that every aspect of the way in which the ongoing Covid-19 epidemic has been dealt with by this government has been incompetent and reckless. If you put your mind to it you can probably think of around 30 major failures in government policy which have significantly contributed to over 65,000 deaths.

The level of incompetence has scaled the extremities of credulity to point that many now believe that government failures were actually intended. The motives behind this fiasco can only be guessed at.

To put that into perspective a third world country like Vietnam, with nothing resembling the medical resources that the UK has, has a 1,700 mile land border with China but has suffered just 35 deaths.

Let's just think about that for a moment. Has the Covid response in the UK been a success by any standard bar the extent of the mendacity of those overseeing it.

The problem is that when you put all of that together and you then get a Covid support package that is/was a dogs breakfast and contained gaping holes leaving thousands upon thousands who needed it with no support.

At the other end of the scale many recipients of support frankly did not need it even if their claims were legitimate.

For example let us remember that the self employed were something of an afterthought in all this and their support scheme was drawn up in such a fashion as to leave many of them without adequate support under the scheme.

Even so the Government then ask a body as notorious for gross incompetence and negligence as HMRC to set up the support system for Covid. You really can't expect that system to be anything but a shambles that is no more fit for purpose than the people who designed it and implemented it. Can you?

It really is a bit rich of HMRC to be complaining at this juncture because they were intimately involved in creating this mess.

Does this mean that Jim Harra will not be getting the mention in the honours list that he thought he would?

Good, perhaps he can now concentrate on getting our money back from the spivs and crooks to whom he so carelessly gave it without asking any of the appropriate questions to safeguard the funds.

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Replying to Red1960:
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By johnjenkins
10th Sep 2020 09:23

Hindsight is such a wonderful thing.

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By philaccountant
09th Sep 2020 10:01

"There’s already clear evidence that the scheme achieved its objectives in terms of reassuring the public about it being safe to go into restaurants and helping restaurants to recover from the lockdown period. "

That statement hasn't aged well.

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By AndrewV12
09th Sep 2020 10:03

extract above
“This figure is purely an estimate and has been issued just a couple of weeks after HMRC issued the first 3,000 letters to firms asking them to check the amounts that they had claimed and warning them that they were under investigation,” she said.

So who got a letter, I doubt anyone on this site has received a letter.

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Replying to AndrewV12:
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By BryanS1958
09th Sep 2020 10:08

One of my clients received one, but they are just responding asking how HMRC arrived at the conclusion that the calculation is wrong, they used the HMRC calculator!

Now, given that there have been numerous versions of the calculator and the questions do not seem to exactly follow the law, it is possible that there is a error, but yet to be proven.

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Nefertiti
By Nefertiti
09th Sep 2020 10:04

I hardly think this matters bearing in mind how many billions our government has already wasted on pointless testing for a virus that has almost disappeared and how they continue to waste billions on finding a new type of test that gets results within 20 minutes instead of 24 hours. Don't forget the cronyism that is going on continuously since January 2020 where lucrative contracts are given to connected persons (probably for kickback purposes) and illegal immigrants getting housed in 4 and 5 star hotels. Maybe its time for the common man to benefit from the plundering of public coffers too.

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Replying to Nefertiti:
By Duggimon
09th Sep 2020 10:09

You should get off the accountancy site and spread the good news to the thousands of people across the country getting infected each day that the virus has almost disappeared and they're imagining it.

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Replying to Duggimon:
Nefertiti
By Nefertiti
09th Sep 2020 10:24

No need to, they already know. That is why many of them have stopped wearing face masks and most of them are ignoring social distancing. Maybe you should get off this accountancy site and look around to see what is really happening in the real world. Number of deaths from virus almost gone now, number of hospital admissions from the virus almost nil. The pandemic is now made up of test results from virus tests that everyone in the medical profession knows is full of false positives and totally unreliable.

https://www.bbc.co.uk/news/health-54000629

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Replying to Duggimon:
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By BryanS1958
09th Sep 2020 10:14

Why should someone with a different opinion to yours get off the accountancy website? You don't believe in freedom of speech?

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Replying to BryanS1958:
By Duggimon
09th Sep 2020 11:29

I just thought spreading the good news to the masses would be a more noble calling, because the fact based reports are much more gloomy.

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Replying to Duggimon:
Nefertiti
By Nefertiti
09th Sep 2020 17:25

Hmm looks like one accountant here has so much time on his hands, that all he does is spam each and every post in the hope of increasing his total thanks score from 1964 to whatever higher number suits him. Once someone gets on a point scoring ride, it is very difficult to stop policing and flooding this site with their own personal views. I count 7 comments from said individual already on this post alone. Oh by the way, one can click on their own comment to get an additional thanks if point scoring is so important.

Bit like a child playing a game, always trying to get the highest score because that is all that matters in life.

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Replying to Duggimon:
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By NeilW
09th Sep 2020 10:22

It's currently about 2900 per day, with no impact on hospitals.

In a country of 67 million people about 0.04% of people may have the virus.

Some perspective.

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Replying to Duggimon:
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By Red1960
09th Sep 2020 12:44

Quite 3,000 a day at present according to the governments own figures. That being the highest figure since the beginning of May,

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By Ian McTernan CTA
09th Sep 2020 13:04

'up to' 'could have'..this read more like something the Labour Party would publish (it's just missing 'crisis' 'tragedy' or some other trigger words).

Yes, there will have been fraudulent claims made- given the timescale to implement the system it was never going to be perfect.

As usual, the reports focus on the negatives, instead of the fact that fast thinking by the Govt has saved millions of jobs and saved the country many many billions.

Overall the actual fraud figure will be quite low, and the mistake figure will probably be higher than the fraud one.

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Replying to Ian McTernan CTA:
By k743snx
09th Sep 2020 13:31

"fast thinking by the Govt has saved millions of jobs and saved the country many many billions"

In the light of today's edict, sorry pronouncement, I wouldn't be too sure.

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Replying to k743snx:
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By BryanS1958
16th Sep 2020 14:18

Fast thinking, Govt and saved (x2!) in the same sentence. Is this an oxymoron?

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Jennifer Adams
By Jennifer Adams
09th Sep 2020 18:33

The chancellor isnt stupid - he must have known that there would be some fraudulent claims but prob thought the benefits outweighed the risks.

But when you think about it .. isnt it really another form of 'quantative easing'.

What can you do with money? You either spend it or save it. so it goes round the economy somehow somewhere.

I understand that some have been sensible and paid more off their mortgages -saying that one subcontractor client of mine worked during the period and spent his money on an outside hottub. Not really what the grant was for but he spent it and at least he spent it in the UK. I heard that there are some who applied for the money and then left to go abroad never to grace these shores again.

I have tried to do my bit for the government (and ultimately the country's bank account balance) by sending emails warning that anyone who breaks the rules might get a letter. I've also kept in touch with my clients by ringing them and asking how they are doing and whether any work is coming in. If they fall into my trap and say they are OK then I've not claimed for the next month if employed.

All you can do is to warn clients of the possibility of a letter so you cover yourself that you have at least told them.

And no.. none of mine have received a letter

Some people have had a lovely enjoyable holiday this summer - the pain for many is to come in a couple of months time.

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Oaklea
By Chris.Mann
10th Sep 2020 13:43

It's such a breath of fresh air to see the accountancy and taxation profession, at "play"!

Just imagine if we all met up, in the sunshine?

Oops-forgot - from Monday, we pretty much, no longer can!

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