Furlough fraud

Monday 22 June 2020

HMRC reported last week that, since April, it has received over 3,000 reports of ‘furlough fraud’ whereby employers are alleged to have abused the Coronavirus Job Retention Scheme (Scheme).

Given the nature of the Scheme and the speed with which it was introduced, it is hardly surprising that it is open to abuse. Some may say that abuse of the Scheme by unscrupulous employers was not only inevitable but was to be expected.

There are four main types of furlough fraud:

• The employer makes a claim to the Scheme for a furloughed employee but then does not pay that employee the correct amount.
• A furloughed employee is asked to work despite having been required to cease working for the employer.
• The employer makes a backdated claim to cover a period when the employee was actually working.
• The employer claims for employees who have not been furloughed.

The most common type of furlough fraud appears to be employers requiring staff to continue working whilst they are furloughed.

HMRC will check all the claims made via the Scheme and has encouraged employees to report employers who have abused the Scheme.

Whilst HMRC can demand repayment of monies paid via the Scheme, issue penalties and potentially instigate criminal action in the very worst cases, it is also seeking new legislation to give it additional powers to pursue employers who have made fraudulent claims.

It is anticipated that every firm that has accessed the Scheme will be audited by HMRC at some point over the coming years given that it is public money being paid out and the significant risk of fraud.

However, it appears that HMRC does recognise that the Scheme was rushed out very quickly with minimal guidance, so many employers will have made honest mistakes when furloughing staff or making a claim.

HMRC has stated that in such cases “We’re not trying to catch people out – if it turns out to be a genuine mistake then we’ll help put it right, and if it’s more serious then we’ll step in”.

If you have any questions about furlough fraud, please email or call our Employment Law team today on 0113 207 0000.