HMRC sees 14k whistleblower reports on furlough fraud

Since the Coronavirus Job Retention Scheme emerged during the pandemic in 2020, or more commonly known as furlough, HMRC has received thousands of reports of fraud.

In fact, 13,775 whistleblower reports have been received by the tax authority about fraud against the scheme as workers start to report their employers and former organisations.

Law firm Pinsent Masons advised that many complex and changeable issues emerged when the furlough scheme came into play, meaning error as well as fraud have been commonplace.

However, HMRC is now stepping up its enforcement activity by handing out penalties and pursuing prosecution or directors’ disqualification where necessary.

The law business shared that this could include instances when it considered firms were claiming furlough but telling or allowing employees to keep working.

Other instances could include where a past fraud has been discovered but the company has not come forward to rectify the position.

In order to encourage whistleblowers to come forward, HMRC has made information about whether an employer has made a furlough claim available online.

This information is now being used by workers to make fraud reports through HMRC’s digital reporting service.

Pinsent Masons added that directors or business owners who are found guilty of furlough fraud could face serious penalties, such as being made personally liable to repay the overclaimed funds, as well as custodial sentences.

Andrew Sackey, partner at Pinsent Masons, explained that any organisation that believes it may have claimed furlough incorrectly should undertake a “fact finding investigation” to find out what happened.

He advised that if a breech is discovered, business leaders should seek advice on how best to quantify and voluntarily work with HMRC to repay the funds owed.

“Employers that incorrectly claimed furlough payments would be best advised to seek advice on how best to come forward and mitigate the issue. HMRC is increasingly looking to take strong and public action in respect of those it considers may have taken public money they were not entitled to,” Sackey added.

“This is the kind of fraud that HMRC will, in the most egregious cases, feel should result in criminal prosecution. There is significant public interest in the justice system dealing with those who broke the rules to take advantage of the furlough system at a time of national crisis.”

A separate study by the law firm revealed that 268 UK company directors have already been banned from running businesses due to covid-related fraud.

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