[UK] HMRC receives nearly 14,000 whistleblower reports of furlough scheme fraud

HMRC has received 13,775 whistleblower reports about furlough scheme fraud from UK workers coming forward about their employers, Personnel Today reports.

HMRC is stepping up its enforcement activity with a view to recovery, issuing penalties and pursuing prosecution or director disqualifications where appropriate, according to Pinsent Masons

This could reportedly include instances when it considers businesses were claiming furlough but telling, or allowing, employees to keep working. It could also include instances where a past fraud has been uncovered but the business has not come forward to rectify the position.

One major case of furlough fraud involved a fraudster in India claiming £27.4m in furlough payments over 14 months. The man in question had never been to the UK yet he registered four companies in London and claimed furlough for more than 2,700 non-existent employees. HMRC recovered £26.5m of this through a forfeiture order in October 2021.

There were many complex and changeable rules around furlough meaning that errors, as well as fraud, are known to have been commonplace.

Andrew Sackey - partner at Pinsent Masons - said the sheer number of furlough claims filed at the height of the pandemic and the need for immediate payments made it very difficult for HMRC to spot fraudulent claims. Mr Sackey said that HMRC has since added significant resources to its investigation teams to pursue fraudulent or inaccurate furlough claims.

As part of a process of encouraging whistleblower reports from employees, HMRC has made information about whether an employer has made a furlough claim available online. Employees are said to be increasingly using this information to make fraud reports through HMRC’s digital reporting service.

Directors or business owners found guilty of furlough fraud can face significant penalties, including being made personally liable to repay the overclaimed furlough funds and custodial sentences.

Mr Sackey said that any business which suspects it may have claimed furlough incorrectly should undertake a fact-finding investigation to establish what may have transpired. If a breach is found, he said business owners should seek advice on how best to quantify and voluntarily engage with HMRC to repay the funds. Taking these steps would reportedly give the owner a better chance of avoiding the harshest penalties.

“Whistleblowers have played a major role in helping HMRC catch those who defrauded the furlough scheme or were otherwise not entitled to the benefits claims,” Mr Sackey said. “Significant numbers of employees who found themselves unwittingly playing a part in a breach of the rules or even fraud will have reported them in response.”

He added that now HMRC is becoming more hardline on the issue, employers who incorrectly claimed furlough payments should seek advice on how best to come forward and mitigate the issue.

“This is the kind of fraud that HMRC will, in the most egregious cases, feel should result in criminal prosecution. There is significant public interest in the justice system dealing with those who broke the rules to took advantage of the furlough system at a time of national crisis.”

A recent analysis by Pinsent Masons using Insolvency Service data found that 268 UK company directors have already been banned from running companies for pandemic-related fraud. Some of these directors committed furlough fraud, while others were found to have defrauded the CBILS and BBLS loan schemes.

£1.3bn in furlough cash had been repaid voluntarily (including from businesses that were entitled to furlough payments) up to September 2021.

Source: Personnel Today

(Link and quotes via original reporting)

HMRC has received 13,775 whistleblower reports about furlough scheme fraud from UK workers coming forward about their employers, Personnel Today reports.

HMRC is stepping up its enforcement activity with a view to recovery, issuing penalties and pursuing prosecution or director disqualifications where appropriate, according to Pinsent Masons

This could reportedly include instances when it considers businesses were claiming furlough but telling, or allowing, employees to keep working. It could also include instances where a past fraud has been uncovered but the business has not come forward to rectify the position.

One major case of furlough fraud involved a fraudster in India claiming £27.4m in furlough payments over 14 months. The man in question had never been to the UK yet he registered four companies in London and claimed furlough for more than 2,700 non-existent employees. HMRC recovered £26.5m of this through a forfeiture order in October 2021.

There were many complex and changeable rules around furlough meaning that errors, as well as fraud, are known to have been commonplace.

Andrew Sackey - partner at Pinsent Masons - said the sheer number of furlough claims filed at the height of the pandemic and the need for immediate payments made it very difficult for HMRC to spot fraudulent claims. Mr Sackey said that HMRC has since added significant resources to its investigation teams to pursue fraudulent or inaccurate furlough claims.

As part of a process of encouraging whistleblower reports from employees, HMRC has made information about whether an employer has made a furlough claim available online. Employees are said to be increasingly using this information to make fraud reports through HMRC’s digital reporting service.

Directors or business owners found guilty of furlough fraud can face significant penalties, including being made personally liable to repay the overclaimed furlough funds and custodial sentences.

Mr Sackey said that any business which suspects it may have claimed furlough incorrectly should undertake a fact-finding investigation to establish what may have transpired. If a breach is found, he said business owners should seek advice on how best to quantify and voluntarily engage with HMRC to repay the funds. Taking these steps would reportedly give the owner a better chance of avoiding the harshest penalties.

“Whistleblowers have played a major role in helping HMRC catch those who defrauded the furlough scheme or were otherwise not entitled to the benefits claims,” Mr Sackey said. “Significant numbers of employees who found themselves unwittingly playing a part in a breach of the rules or even fraud will have reported them in response.”

He added that now HMRC is becoming more hardline on the issue, employers who incorrectly claimed furlough payments should seek advice on how best to come forward and mitigate the issue.

“This is the kind of fraud that HMRC will, in the most egregious cases, feel should result in criminal prosecution. There is significant public interest in the justice system dealing with those who broke the rules to took advantage of the furlough system at a time of national crisis.”

A recent analysis by Pinsent Masons using Insolvency Service data found that 268 UK company directors have already been banned from running companies for pandemic-related fraud. Some of these directors committed furlough fraud, while others were found to have defrauded the CBILS and BBLS loan schemes.

£1.3bn in furlough cash had been repaid voluntarily (including from businesses that were entitled to furlough payments) up to September 2021.

Source: Personnel Today

(Link and quotes via original reporting)