HMRC seek powers to investigate ‘furlough-fraud’
6th July 2020 
General, Tax 
CHW Accounting
Employers are being urged to double check claims they have made under the Coronavirus Job Retention Scheme (CJRS) as HMRC are expected to focus their efforts on tackling incorrect and fraudulent claims.
Draft legislation has been published will give HMRC the power to check that CJRS grants made to employers have been used correctly to pay workers’ wages, and to ensure employers have not been overpaid.
HMRC would be allowed to reclaim any furlough money overpaid to employers or not spent on wages as intended. Any organisation caught deliberately using furlough money for anything other than its intended purpose will face a financial penalty.
The legislation is being fast tracked through parliament and if it is implemented it could come in to effect as early as July.
Accidentally misused the scheme?
Where employers realise they may have accidentally misused the furlough scheme, there is a 30 day amnesty period in which to tell HMRC. The draft Bill states that ‘the penalty will only apply if the person fails to notify HMRC about the situation within 30 days.’
Put simply, employers would have 30 days to admit their mistake and avoid the penalty and stigma for committing furlough fraud.
More HMRC investigations expected
HMRC had received 1,868 error notifications by the end of May and has told the BBC that it has received more than 3,000 reports of furlough fraud since April.
There has been an increase in reports of employees whistleblowing on their companies after being forced to work whilst their employers have claimed furlough for the employee at the expense to the tax payer.
There are likely to be serious sanctions for employers where HMRC discover carelessness or fraud in claiming furlough payments.
To summarise
For business owners, many of whom implemented claims in haste at the start of lockdown, now is the time to double check the amounts are correct, that the paperwork is accurate and government guidelines have been adhered to.
HMRC will impose a penalty if an employer has deliberately made an incorrect claim or deliberately hasn’t pass on the furlough payments to employees.
Employers will be granted a 30 day ‘amnesty’, during which a penalty will not be charged if they come clean to HMRC.
We recommend you make sure your ‘affairs are in order’ in advance of any potential HMRC investigation.
Get in touch
We strongly recommend that employers review the claims submitted to the CJRS in order to identify any inaccuracies and be sure that the funds have been used correctly. If you are unsure whether you have correctly used the CJRS contact us at hello@chw-accounting.co.uk and we can help.
If you subject to an HMRC investigation and are covered by our Tax Investigation Service then CJRS investigations are included in your cover.
This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.
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