Furlough fraud

The economic package created by government to support the economy during the coronavirus pandemic has supported over 1.1 million employers with payments for over 9.4 million employees. However, as reported in the Guardian, the National Audit Office have stated the economic package is open to ‘significant abuse’ and the BBC recently reported that up to £35billion pounds could have been paid out as a result of fraud or error.

With this in mind, it is no surprise that HMRC has created a hotline for members of the public to report individuals and businesses suspected of abusing this economic assistance. As well as dealing with the Coronavirus Job Retention Scheme (known as furloughing) the hotline allows reporting of abuses of the Self Employment Income Support Scheme (SEISS), the statutory sick pay scheme for self-isolating workers, and even the Eat Out to Help Out Scheme, that saw millions of customers enjoying half price meals at restaurants throughout August.

Enabling the public to inform on others, potentially anonymously, creates the possibility of malicious or baseless reports. However, with the BBC reporting in early September that the hotline had received over 8000 calls, common sense suggests that a proportion of these reports will result in action being taken.

Some Examples of ‘furlough fraud’ could involve claiming a wage subsidy for an employee who doesn’t actually work for the company or claiming to furlough a worker when in fact they never stopped working.

What could happen if my business has over claimed funds for furloughed workers? Or if I have over claimed SEISS payments or other economic assistance?

The Finance Act 2020 allows for civil penalties for those who have over claimed furlough or SEISS payments. The Act provides a correction window which lasts until 20^th October 2020 or 90 days after the payment is made (whichever is latest) to allow over-claimers to self-report any breaches. Minor breaches that are self-reported are likely to be treated more leniently.

Those failing to self-report and those accused of more serious misuse of the system are likely to be prosecuted under The Fraud Act 2006. This legislation allows prosecutions for offences such as Fraud by False Representation or Fraud by Abuse of Positon. A conviction for offences such as these will lead a criminal record and the possibility of a significant prison sentence.

In order to be convicted of such offences it must be proven beyond reasonable doubt that an individual has made a dishonest false representation or abuse of position with the intention of making a gain for themselves or others or with the intention of causing a loss to others.

The recent examples in the media of individuals being arrested for ‘furlough fraud’ valuing £70,000 and £500,000 prove that HMRC are taking abuses seriously and shows that those who are suspected of such offences are at risk of prosecution.

What should I do if I am under investigation for furlough fraud? Or if I have missed the deadline for self-reporting? 

If you have missed the self-reporting deadline or if you or your business have been contacted by HMRC, the police, or you have been arrested in relation to an allegation of furlough fraud or anything  similar, it is important that you seek specialist legal advice as soon as possible.

A criminal solicitor will be able to guide you through the investigation process and may be able to make representations that you should not be charged with an offence. If you are charged with an offence and have a date to attend court a solicitor can assist you in preparing your case and will be able to identify and put forward any defence you may have.

Article written by Alex Close-Claughton

If you are under investigation in relation to furlough fraud or require initial advice please contact Ruth Peters or Matthew Claughton on 0161 834 1515 or by email to info@olliers.com.