30-day Furlough Fraud Confession Window Opens In July
HMRC are introducing a Furlough Fraud Confession Window for employers to admit mistakes they may have made under the Coronavirus Job Retention Scheme. The window is expected to be a 30-day period. The plans are being fast-tracked through Parliament and are expected to become law in early July 2020.
According to a survey by Crossland Employment Solicitors 34% of 2,000 furloughed employees had been asked to work for their employer in breach of the ‘no work’ rules of the Coronavirus Job Retention Scheme and 29% were told to carry out administrative tasks while furloughed.
Treasury figures revealed on 16 June 2020 that £20.8 billion had been claimed covering 9.1 million jobs, and Office for Budget Responsibility (OBR) forecasts predict the entire scheme will cost £60 billion.
If the results of the survey are representative, it would mean the government is paying around 3 million people who aren’t entitled to the grant and ministers have warned employers would be committing fraud if staff were made to work while furloughed.
HMRC have said “This is taxpayer’s money and fraudulent claims limit our ability to support people and deprive public services of essential funding. Claims are checked and payments may be withheld or need to be repaid if the claim is based on dishonest or inaccurate information. We won’t hesitate to take criminal action against the most serious cases.”
What Does Furlough Fraud Look Like?
Not telling an employee they are furloughed and claiming the CJRS grant without their knowledge and while they carry on working is the most obvious form of furlough fraud but here are some other ways that employers are abusing the system.
- Furloughed employees are pressured to send and respond to emails or make phone calls while furloughed: Furloughed employees by law are not allowed to be actively engaged in any work for their employer while furloughed.
- Furloughed employees are asked to come to the workplace rather than being asked to work from home: This is still against the rules and should be discouraged.
- Furloughed employees are encouraged to “volunteer”: Asking a furloughed employee to continuing working as a “volunteer” is against the law.
HMRC Furlough Fraud Hotline
HMRC have a fraud hotline for people to report breaches, as of 14 June they reported receiving 3,079 reports from the public. They are urging any employee who thinks their company is abusing the system to contact them.
The chief executive of HMRC recently told the Commons Public Accounts Committee that the scheme was a “magnet for fraudsters” and that tip offs were taken “very seriously”.
HMRC Furlough Fraud Confession Window
HMRC is preparing to tackle fraudulent and erroneous claims made to the CJRS but first wants claimants to confess to any misuse by providing a 30-day window of opportunity.
Draft legislation is being rushed through parliament that is expected to introduce a 30-day window of opportunity to ‘confess’ and notify HMRC of any mistakes. After this it will be ‘gloves off’ for HMRC to pursue incorrect claimants using both criminal and civil powers. For business owners, many of whom may have implemented claims in a rush at the start of lockdown, now is the time to check and double-check the amounts are right. Making sure the paperwork is accurate and government guidelines are adhered to is key.
Once the 30 day window has closed they are likely to ramp up their investigations and were HMRC suspects fraud we can expect the investigations to be serious.
Penalties For Defrauding HMRC
If you don’t confess and are found to have defrauded HMRC, you will have to pay back the furlough grant (and may have to pay back all furlough monies – even if some of them were correctly made).
As it is fraud on the Treasury then an employer could be imposed with a hefty fine, asked to pay past payments back, have any future payments withheld or even potentially face prison.
Legislation is also set to be introduced giving powers to impose penalties and to pursue directors of insolvent companies personally.
Implementation of the Furlough Fraud Confession Window
The legislation is expected to become law in early July as part of the Finance Bill 2020. A consultation period ended on Friday 19 June 2020.
What You Need To Do Now
- Now is the time to check, check and check again your calculations. Do you understand the methodology for calculating a claim? Have you used the correct formula for calculating the 80% of pay? Have you claimed the right amounts from HMRC?
- Secondly check your paperwork is accurate. Have you copies of all correspondence sent to employees? Did employees agree to the period of furlough and to do no work? Are you 100% employees who are furloughed have done no work?
Remember when HMRC audit your CJRS claims they will check the metadata of your letters and agreements, so you won’t be able to create these in the future and backdate them!
- Don’t ask staff to work if they are furloughed. If you need people to work, you can unfurlough them and re-furlough them at a later date.
- From Wednesday 1 July, you can ask staff to return to work on a part time basis and furlough them for their remaining hours under the new rules on flexible furlough
- Review historical claims to confirm whether they have been processed corretly. If you have incorrectly claimed under the furlough scheme, you will be given a 30 day window to ‘confess’ and pay back the money. Draft legislation is going through parliament and may come into force as early as the beginning of July.
- Don’t assume that everyone you’ve furloughed has remained off work. In larger organisations, messages can be diluted and mistakes happen. Ask your managers to confirm to you that no-one from their department who has been furloughed has been ‘working on the side’.
If you don’t use the confession window and are later found to have defrauded the revenue, you will have to pay back the furlough grant (and that could mean paying back all furlough money you have claimed, even if some of your claimes were correctly made), pay a penalty and Directors could also be prosecuted.
It is clear that HMRC is now gearing up to tackle incorrect and fraudulent claims for Coronavirus support payments. Latest government statistics show the eye-watering numbers paid out and why HMRC resources will focus on this potential new area of fraud. Almost £20bn was paid out to more than one million employers in furlough claims as of 16 June 2020.
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