Furlough Fraud
HMRC are on the warpath to claim an estimated 50% of the billions paid out to companies in furlough claims that were made incorrectly. They've invested £100 million in a task force to investigate and prosecute any wrongdoers.
The scheme has been brilliant and made it easy for companies and their employees to avoid severe financial hardship. The Government clearly didn't want to hold back money from those who really needed it, they got the scheme moving quickly and made the process really straightforward. The problem is that it's been so easy to access that some companies have exploited the system.
The penalties for deliberate fraud are full repayment PLUS 100%!
If you have furloughed employees at any point since the beginning of lockdown in March 2020, there's a good chance HMRC will investigate to check your records are accurate.
They'll be looking for three key pieces of information
- Proof that each employee was eligible for furlough for all periods claimed. This is usually the RTI (your payroll submission) for the month prior to each furlough period.
- The letter or email to each employee confirming that they are furloughed and telling them they can do no work of any kind for the business during the furlough period.
- Proof that they didn't work. This would include clocking in and out cards, evidence of activity (or lack of it) on their company email account and/or log in information for the company server. This is probably going to be the hardest part to evidence.
Even if you know you have not bent the rules you should have this information available on file. It's not a random check, if HMRC investigates you can be sure they'll carry out a thorough dig into the information.
If you know you've erred and voluntarily own up you can repay the amounts claimed in error by reducing the amount of your next furlough claim or, if no further claims are to be made, by calling HMRC and asking for a payment reference before making a bank transfer. We recommend you consider this sooner rather than later.
HMRC do have a helpline that anyone, including employees, can call if they think their company is breaching furlough rules
Remember the purpose of furlough payments.
The furlough grant was issued to cover wages/salaries - and taxes. So if you've claimed the furlough grant, but haven't kept up-to-date with your PAYE submissions and payments, this could be seen as fraud. This grant was not to support business continuity, but to protect employees from unavoidable hardship, so make sure PAYE payments and pension contributions are paid up to date if you have claimed furlough grants.
Don't do nothing - the HMRC task force are already in action and have made some highly publicised arrests. Appearing on the national news as a fraudster doesn't do you or your company's reputation any good at all.