HMRC cracks down on furlough fraud
Member: Roger Isaacs
HM Revenue & Customs (HMRC) has confirmed that it is cracking down on furlough fraud, having given employers just 30 days to admit any mistakes made on claims.
Almost £20 billion has been paid out to more than one million employers in furlough claims via the Coronavirus Job Retention Scheme (CJRS), as of 7 June 2020.
However, as of 29 May, HMRC had received 1,868 reports of potential furlough fraud to its digital reporting service. This is more than double the number of reports it received just a few days prior on 12 May (795).
In many cases, the acts reported are due to employees working while on furlough, which is not permitted under the terms of the scheme.
Revenue officers have now made their first arrest as part of an investigation into a suspected £495,000 Coronavirus Job Retention Scheme (CJRS) fraud.
The 57-year-old man was also arrested in relation to a suspected multi-million-pound tax fraud and alleged money laundering offences, while a further eight men have been arrested as part of the linked investigation.
As with most arrests, when the suspect’s offices were raided, officials seized his computers and other digital devices and froze his business bank accounts to preserve evidence.
HMRC’s report into the arrest tends to suggest this was a very deliberate and well thought out conspiracy to defraud HMRC through the CJRS but there are likely to be many other cases where fraud may be less obvious.
When investigating suspected fraudulent claims, forensic investigators and accountants will confirm if staff members have really been furloughed by analysing their email systems and servers or by looking at audit logs showing when employees were signed in.
They could also use social media platforms, payroll records or call logs to assess whether employees were conducting work when they should have been furloughed.
Roger Isaacs, Forensic Partner at Milsted Langdon, said: “The CJRS has provided a vital lifeline to many businesses during the pandemic, ensuring that employees can be retained and brought back to work as restrictions are lifted.
“Unfortunately, it is becoming clear that in some cases claims have not met the strict criteria of the furlough scheme and HMRC is determined to stamp this out to prevent the misuse of the support available.
“Fraudulent activity can be picked up by experienced investigators in many ways and once they have collated the evidence that supports allegations, they can take action to arrest and charge suspects.”
Roger added that it was important that businesses that have furloughed employees check their records and ensure that they are compliant with the terms of the CJRS.
Author: Roger Isaacs
15 July 2020