A joint investigation by the Times Newspaper and BBC File on 4 has uncovered evidence that senior executives at Brewster Partners, a Yorkshire based recruitment firm with offices in several parts of Yorkshire, London and Manchester, encouraged their employees to carry on working after they had been furloughed.
Covert recordings obtained by the Times and File on 4, purport to show Nigel Brewster, the firm's Managing Partner, advising staff that they could still work whilst on furlough and that he had a cunning plan on how to make use of the scheme, which he referred to as a Government grant that the firm would be daft not to take. Other recordings purport to show Lisa Brewster, another Managing Partner at the firm, advising staff that they were technically not supposed to work whilst on furlough but that they could chose to work if they wanted to.
The firm, which counts former DLA Piper chairman Sir Nigel Knowles as its chairman, has strongly denied any wrongdoing in relation to its use of Coronavirus Job Retention Scheme (popularly referred to as the Furlough Scheme) and has contacted HMRC about the matter. Dame Margaret Hodge, the former head of the Public Accounts Committee, has written to HMRC to ask that they carry out an investigation into Brewster Partners.
Recruitment firms should be aware that the Government and HMRC take any suspected abuse of the furlough scheme very seriously. Since the height of the pandemic, there have been wide spread media reports about the abuse of the scheme. Appearing before the Public Accounts Committee on 7 September 2020, Jim Harra Chief Executive of HMRC stated that HMRC suspected that between £1.75 billion and £3.5 billion had been fraudulently or erroneously claimed via the furlough scheme.
In March of this year the Chancellor Rishi Sunak announced the formation of the Taxpayer Protection Taskforce staffed by 1250 HMRC employees, backed by £100 million from the treasury and with a remit of tackling non-compliance across the various Government Coronavirus Support Schemes.
Also, the Finance Act 2020, which received rapid ascent in 2020, now in certain instances gives HMRC the power to make company officers personally liable for the tax liabilities that arise out of incorrectly or fraudulently claimed payments under the Furlough Scheme.
The pandemic saw unprecedented Government support to help business and individuals remain financially viable during the intense period of instability that it created. The Government and HMRC have now set their sights on tackling any suspected misuse of this Government Support, and firms should be alert as to how this might impact them, particularly in an era in which we are likely to see a significant increase in whistleblowing (from both legitimate and illegitimate sources).
Firms should revisit any application that they made for any of the Government Coronavirus Support Schemes, to assess whether any potential errors were made in how these applications were submitted, or how the funds received were appropriated. Where firms suspect any errors on their side, it is imperative that they seek specialist legal advice from lawyers that are experienced in advising on investigations and HMRC enquiries.
"Given over £60billion of taxpayer money has been paid over during the 'furlough scheme', it goes without saying that HMRC will be doing all that they can to recover as many mistaken and fraudulent claims. Hundreds of additional investigators within HMRC will be spending the next few years reviewing claims that were made during the height of the pandemic. As ever, it is always best to be in the position of disclosing first to HMRC rather than waiting for them to pick up issues; not least for the potential savings in penalties." Waqar Shah, Partner in the Tax Disputes and Investigations Group
"Although the furlough scheme has ended, employers should not become complacent as time passes. With the massive amount of public money paid under the furlough scheme and the commitment to reviewing the applications submitted and payments made, we can expect HMRC to seek to recoup the public expense wherever they can and to use criminal sanctions in the most serious of cases. The high profile nature of the scheme will also cause sustained attention and scrutiny by the press and political groups as we have seen by the work of the BBC and the Times. " Matthew Ewens, Partner in the White Collar and Investigations Group.