Furlough Fraud Investigations

HM Revenue & Customs (HMRC) has been investigating employers and company directors in relation to furlough fraud. Here, we explain more about how HMRC is investigating furlough fraud, and how our solicitors can help you.

If you would like to have a free confidential discussion with a member of our team, please either make a Free Request For Call Back or call us directly on 01908 414990 and we will be pleased to help you.

What is Furlough Fraud?

The Coronavirus Job Retention Scheme (CJRS), commonly known as furlough, allowed employers to claim up to 80% of their employees’ wages up to a maximum of £2,500 per month. The scheme was designed to help businesses retain their employees during the pandemic and prevent redundancies.

However, HMRC says some employers abused the scheme by making false or inflated claims. This includes claiming for employees who were not eligible and failing to pass on the full furlough payment to their employees.

Fraud Investigation Service HMRC

HMRC has been actively investigating furlough fraud since the CJRS was introduced in March 2020. A specialist task force was even set up to recover the money lost through Covid-19 government support schemes, which is thought to total more than £4 billion. HMRC expects the task force to recover over £500m before the unit closes in September 2023.

HMRC has been proactive in identifying potential fraud cases by conducting risk assessments on claims made under the scheme. In cases where HMRC identifies possible fraud, they have launched investigations into the businesses. The investigations involve a thorough examination of the business’s financial records, employee records, and any other relevant documentation.

In some instances, HMRC has conducted interviews with the employees to determine if they were aware of any fraudulent activity by their employer. HMRC has also received tip-offs from the public and employees who suspect their employer of committing fraud. In August 2022, it was reported that almost 14,000 whistle blowers had come forward with information.

Furlough Fraud Investigations and Penalties

If HMRC identifies potential fraud, they will launch an investigation into the employer. The investigation can involve interviews with employees, site visits, and a review of financial records. HMRC will also look for evidence of deliberate and systematic fraudulent activity, such as claiming for non-existent employees or claiming for employees who were still working.

Employers and company directors found guilty of furlough fraud can face severe consequences. They may be required to repay any fraudulent claims made under the CJRS and face penalties of up to 100% of the amount claimed. In serious cases, employers and company directors may face criminal charges, which can result in imprisonment for up to 10 years.

How do I know if I’m under investigation by HMRC for Furlough Fraud?

HMRC has both civil and criminal powers of investigation. For the most part, HMRC will rely on its civil powers of investigation, which often begins with a compliance check. Typically, you will receive a letter of concern through the post, asking you to provide evidence to confirm your entitlement to furlough payments. Using this information, HMRC will determine whether any money must be repaid. If so, financial penalties may also be imposed.

If a company director had a part to play in wrongfully claiming furlough payments, HMRC may escalate the matter to director disqualification proceedings. This is when a government body – such as HMRC – says that an individual is unfit to act as a company director and seeks to have them ‘struck off’. Director disqualification can last for between two and 15 years.

If serious fraud is suspected, HMRC may choose to rely on their criminal powers of investigation too. This includes dawn raids, search and seizures, and arrests.

Are you suspected of Furlough Fraud?

If you are under investigation for furlough fraud and now face the threat of financial penalties or director disqualification, our solicitors can help you. We are highly experienced at dealing with HMRC investigations and know exactly how to handle the situation. We can liaise with HMRC directly on your behalf, requesting more time to gather evidence if needed. Our team will then work closely with you to secure the best possible outcome. This outcome will depend on the circumstances, but could include:

Proving that you claimed the correct amount of furlough payments
Minimising the penalties associated with inaccurate furlough claims
Negotiating civil penalties for Furlough Fraud, rather than criminal proceedings
Defending company Director Disqualification proceedings
Appealing HMRC’s decision