HMRC turns up the heat on furlough fraud.

While the energy and cost-of-living crises dominate the headlines, HMRC has turned its attention to tracking down the perpetrators of Covid fraud. That is, the businesses that fraudulently claimed money from the various schemes put in place by the government to help firms survive the pandemic.

A UK Parliament committee has estimated that £5.3 billion was lost to fraud through the Coronavirus Job Retention Scheme (also known as furlough), which is 8.7% of the total monies distributed under the scheme.

Not all of the businesses who misclaimed will have done so intentionally. In fact, as of September 2021, £1.3 billion in furlough cash had been repaid voluntarily, including from businesses that were entitled to furlough payments.

If you believe you’ve claimed money you weren’t entitled to, you should seek independent advice as soon as possible, to avoid the consequences of any subsequent investigation by HMRC.

What should you do if you’ve over-claimed?

Clearly, many companies will struggle with the extra burden of repaying overpaid furlough monies, at a time when cash is so tight for many. However, if you have misclaimed under the scheme, the money will need to be repaid.

We’ve advised company directors who are looking to rectify the mistakes they made when claiming funds under the Covid loan schemes, including furlough. Our help and guidance has enabled them to voluntarily engage with HMRC to repay the funds and avoid the harshest penalties.

What are the consequences of furlough fraud?

Directors or business owners convicted of furlough fraud face significant penalties, including being made personally liable to repay the over-claimed funds, being barred from being a company director, and even a custodial sentence.

So far, 268 UK company directors have been banned from running companies for Covid-related fraud, including the Coronavirus Job Retention Scheme (furlough), the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS).

Some of these have been prosecuted thanks to over 14,000 tip-offs from employees about suspected fraud committed by their employers. Andrew Sackey, a partner at law firm Pinsent Masons, has said that “Significant numbers of employees who found themselves unwittingly playing a part in a breach of the rules or even fraud will have reported them in response.”

The key is to ‘make good’ as soon as you can, should you realise that you’ve made a mistake in your claim – in the case of furlough or any other Covid-relief scheme.

If your business is struggling from the impact of the pandemic, or you think you’ve misclaimed furlough and cannot pay it back, you could benefit from our advice and guidance. Call us on 01455 555 444 or email [email protected] and we will call you back.

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