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HMRC has put in place an online portal for employees and the public to report suspected fraud in the Coronavirus Job Retention Scheme and in their guidance to employees they say “If you’re concerned that your employer is abusing the scheme you should report them.”
HMRC may have suspended ongoing civil and criminal tax investigations during the COVID-19 pandemic but if taxpayers make claims to any of the government’s coronavirus crisis financial support schemes to which they are not entitled they can expect to be investigated by HMRC as confirmed in HMRC’s furlough payment guidance:
“HMRC will check claims made through the scheme. Payments may be withheld or need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent.
Dishonest or deliberately fraudulent claims put our essential public services and the protection of livelihoods at risk during these challenging times.”
There are several schemes and the main ones are as follows:
The qualifying conditions attached to each scheme vary enormously. For example, the £10,000 small business grants are paid automatically to businesses registered with their district council for small business rates relief and without the need for an application while the Job Retention Scheme for 80% of furloughed employees’ pay is very complicated and comes with a digital assistant in order to assist claimants.
Financial support schemes on such an enormous scale will inevitably attract scammers and false claims. While the emphasis is necessarily on protecting taxpayers from coronavirus scammers and also getting financial help to businesses that need it without immediate checks, it is inevitable that HMRC will get round to checking the validity of claims made by taxpayers and will pursue those they suspect of having claimed for help when they did not meet the conditions for payment.
When HMRC suspect fraud they can either carry out a criminal investigation with a view to prosecution or they can decide to issue a Code of Practice 9 letter to the suspected fraudster under which they offer the taxpayer the chance to make a full disclosure under a contractual arrangement called a Contractual Disclosure Facility within 60 days of the offer being made. If a full disclosure of the fraud is made, HMRC undertake not pursue a criminal investigation with a view to prosecution however the civil consequences of admitting fraud not only involve paying back the ill-gotten gains but also serious penalties, enhanced HMRC checks for the future and publication of name with professional persons required to self-report their fraud to their professional body with consequential suspension of disbarment.
The nature and methods of false claims made by fraudsters is only limited by the guile and imagination of those involved. However, some potential frauds with COVID-19 are very straightforward and one recurring theme is likely to be found with the Coronavirus Job Retention Scheme otherwise known as the 80% furlough scheme because it pays the employer up to 80% of an employee’s wages during the furlough period of up to 4 months. The most basic condition of the scheme is that to be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation or any linked or associated organisation and this includes providing services or generating revenue.
Already there have been reports of employers pressuring workers on furlough to undertake work for the employer in breach of this rule. More blatant scams are likely to involve furlough claims for non-existent workers by employers who then disappear before HMRC get round to checking the veracity of such claims.
The two most likely criminal charges if a scammer is caught making a false COVID-19 claim are:
The sentencing guidelines are here.
You need to properly document and evidence claims that you make for coronavirus financial support including Coronavirus Job Retention Scheme claims for furloughed workers if you wish to avoid challenges from HMRC in respect of such claims. To be safe the type of evidence you should create and retain include an assessment showing the impact of coronavirus on your business and how this justifies the furloughing of staff with computations showing the amount being claimed plus email communications between the employer and employee setting out the furlough arrangements and their agreement.
A failure to provide evidence and documents in support of claims to COVID-19 payments will run the risk of having to refund the payments plus penalties and interest or worse, criminal investigation. Remember that when things eventually return to a kind of normality, the tax investigator of tomorrow may take a very different view to the government’s current urgency in getting as much financial support out to businesses as it can.
If you are about to claim, or have claimed, COVID-19 financial support and wish to avoid the risk of a potential HMRC investigation and would like to discuss how Patrick may be able to advise and assist you please contact him here for an initial discussion.