HMRC… ‘furlough fraud’ what are they looking for?

HMRC is predicted to audit thousands of small businesses to ensure furlough payment claims were legitimate and accurate.

To date, the Government has exhausted some £39.4 billion via the Coronavirus Job Replacement Scheme (CJRS). Its recorded to date that the CJRS supported more than 9.6 million workers furloughed by their employers.

HMRC estimate that between £1.75 billion and £3.5 billion could have been claimed fraudulently or by mistake to which HMRC have already begun investigating.

Although HMRC have said that they are committed to helping businesses rectify honest errors in furlough claims made in a hurry this year, it is highly likely that we will see an increase in the number of inspections it carries out.

If HMRC does deem an inspection necessary, business directors/owners will need to provide clear, accurate and up-to-date information. Requests can be made on relatively short notice, so it is recommended that employers have the information readily available and are able to provide it to HMRC in a timely manner.

Information HMRC is likely to require employers to provide may be:

• Employee information, including personal details, calculation details, hours worked
• Evidence of payments and claims
• Details of any adjustments or corrections; and
• Confirmation that everything matches the Real Time Information submitted

Most businesses have used CJRS as intended, so there’s no need to worry, but due to the nature of the scheme, it’s been opened to abuse by employers.

A ‘whistleblowing’ hotline was setup by HMRC to report any abuse or misuse of the scheme, and thousands of reports have already been made.

HMRC are most interested in the following circumstances:

• Employers claiming for fictitious employees
• Employees working during the furlough period
• Situations where circumstances changed and impacted eligibility
• Furloughed staff returning to work earlier than expected
• CJRS grants not paid to employees within a ‘reasonable period’

Therefore, HMRC will want to check a number of the claims made by employers during the scheme. Earlier in 2020, HMRC announced they are considering 6,749 cases of potential misuse of the CJRS.

Although, for the moment, it is predicted that only a relatively small percentage of employers will be contacted by HMRC, it is a good idea to consider now whether you would be easily able to gather the information set out above, should it be requested. For the companies that are scrutinised, the process will be an unwelcome headache at a difficult time when the focus should be on moving forward and ultimately coming back stronger.

Taking time now to bring information together is sensible, not only if HMRC do require your records but also in terms of working more efficiently as we emerge on the other side of the crisis.