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HMRC continues to enforce furlough fraud, following 14,000 whistle-blower reports

Posted on 17 August 2022

paper cutout of whistleblower

Earlier this month, we considered one of the first judgments released by the First-tier Tax Tribunal on the Coronavirus-Job Retention Scheme (otherwise known as the furlough scheme). Although this was one of the first judgments released on the misuse of the scheme, it was anticipated that this would be one of many appeals brought before the Tribunal over the coming years.

This is supported by recent reports that HMRC have received almost 14,000 whistle-blower reports relating to the furlough scheme fraud. Reports indicate that most of the whistle-blower claims relate to employers and ex-employers who have either intentionally or unintentionally breached the rules of the scheme. Over the course of the last two years, HMRC has increased enforcement action on furlough fraud, through their Taxpayer Protection Taskforce and an influx of nudge letters issued to taxpayers (as discussed in our article on HMRC's crackdown). Given the astronomical amounts of monies lost to fraud and errors through the furlough scheme (which was estimated to be over £5.5bn last year), HMRC will no doubt make efforts to enforce their mandate by any means necessary. This is also a timely reminder that HMRC does have extensive powers to claw back any funds that were claimed by businesses (both erroneously or fraudulently), impose penalties of up to 100% of the sums owed as well as "name and shame" individuals as deliberate tax defaulters.

As a result of this recent development, employers should by no means ignore their obligations when it comes to internal checks and audits, record keeping and reviewing historic payments claimed under the furlough scheme. The decision in Carlick Contract Furniture Limited informed us that the Tribunal will not be sympathetic to employers who have not submitted furlough claims correctly, and will no doubt take a firmer stance against businesses who have not taken the opportunity to audit their claims or have failed to disclose any errors to HMRC in order to correct their position.

Partner Waqar Shah says that, "the latest report on whistle-blowing numbers emphasises the need to be proactive, even if businesses only entered into the furlough scheme for a limited period of time. HMRC are aware that the urgent roll out of the furlough scheme with limited guidance available has led to errors being made. However, there is no longer an amnesty period available and if HMRC discover that businesses have made inadvertent mistakes but have not been forthcoming with disclosures and/or repayments, they will not hesitate to enforce and apply penalties. Given that a large portion of the whistleblowing has come from ex-employees, it is as important as ever to look into historic payments claimed from the scheme and ensure that any potential breaches are remedied."

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