Employers who have received or retained payments in relation to the Coronavirus Job Retention Scheme (CJRS) to which they were not entitled, have until next Tuesday (20th October 2020) to make repayments or they could receive fines or be arrested and receive a prison sentence.
Fiona Fernie, a Tax Dispute Resolution Partner at tax and advisory firm Blick Rothenberg, says: “HMRC have shown that they are taking this very seriously and they are willing to use both civil and criminal powers to pursue incorrect claims.
“They are already investigating approximately 27,000 high risk claims where they believe that either the claim is fraudulent, or a serious error has been made, and have started sending letters to employers opening enquiries. Arrests have also been made in relation to alleged furlough fraud - the first in July and another in September.”
Employers are also being warned that even where a criminal investigation is not undertaken, if they have claimed a CJRS they were not entitled and do not notify HMRC within the 90-day ‘amnesty’ period, the penalty could be up to 100% of the grant improperly claimed.
Fiona adds: “HMRC’s activity is going to ramp up now that the first "amnesty" period is drawing to a close. Any employers who are unsure of the validity of their claims should spend the weekend checking them rigorously. “
The check should encompass the numerical accuracy of the claims and the justification for making them and should also ensure that a complete set of records supporting the claims has been maintained.
Where HMRC suspect furlough fraud, they may also enquire into the personal tax affairs and wider business interests of those involved, as demonstrated by the first arrest in July.
The rules apply to both employers using the CJRS and the self-employed who applied under the Self-Employment Income Support Scheme (SEISS).
HMRC is encouraging anyone who feels their employer may have been fraudulently claiming furlough to report it, and it is expected these will be followed up after Tuesday’s deadline has passed.
More than 80,000 employers had voluntarily repaid in excess of £215 million in respect of incorrect furlough claims up to the 15th of September 2020, but this is still a fraction of the £3.5billion which HMRC estimated may have been overclaimed up to that point.