Has my business committed furlough fraud? It’s a question many company owners may be asking themselves. We round up the types of fraud and offer advice. Coronavirus and the Job Retention Scheme is ever-changing, this article was published on 25 June 2020.
The introduction of the Coronavirus Job Retention Scheme (CJRS) in March 2020 was designed to help employers keep their businesses running whilst they experienced a downturn in business activity due to the Covid-19 pandemic. Between 19 March 2020 and 30 June 2020, the Government paid 80% of a furloughed employee’s wages, up to a value of £2,500. But if you’re asking ‘has my business committed furlough fraud’, you may be seeking clarification.
HMRC is now turning its attention to reports of abuse of the scheme – furlough fraud. The scheme is changing from 1 July 2020 through to the end of October, as outlined in our article here.
What is furlough fraud?
Over the course of the Job Retention Scheme, the government (as of 14 June 2020) has paid out almost £21 billion to employers. Inevitably, not all of this has been claimed in good faith, with some businesses claiming money they were not entitled to, or having furloughed employees continue to work for them in breach of the rules. Understandably, the government is keen to recoup any such unnecessary expenditure and payments which businesses were not entitled to.
Legislation is set to be introduced to address the issue of furlough fraud, partly encouraged by more than 3,000 anonymous tip-offs being made to HMRC by employees who believe their employer has been abusing the furlough scheme. It is expected that employers will be given a 30-day amnesty period to confess to making claims incorrectly under the CJRS – either knowingly or innocently.
Furlough fraud can come in many guises. Some businesses will have rushed into using the scheme in order to provide vital financial support, but not have used it properly, or calculated amounts claimed incorrectly.
What are the different types of furlough fraud?
Some forms of furlough fraud might easily have been innocent and came from a lack of understanding of the rules. Others may be a deliberate attempt to abuse the system, using government funds to pay their other costs. Types of furlough fraud include:
- Asking a furloughed employee to work: A furloughed employee was not permitted to undertake any work which provided a service or generated revenue.
- Furloughing an employee without telling them: A company would be committing furlough fraud if their employees only found out they were furloughed or on 80% pay when they were paid. Being furloughed had to be agreed with employees.
- Furloughing staff without paying them what they are owed: While employers are not strictly required to pay the remaining 20% of an employee’s pay, they must continue to pay the 80%, subject to the cap, that is covered by the Job Retention Scheme.
- Backdating illegitimate claims: Employers may not retrospectively claim for periods in which employees were working, regardless of whether they could now benefit from that money.
- Claiming for a “ghost” employee: Claiming through the scheme for an employee who doesn’t exist, or wasn’t hired in time for the scheme to apply, or exist at that company any more.
What are the potential penalties for furlough fraud?
While ‘furlough fraud’ is not currently defined in statute, it will be soon. Likely offences include:
- Conspiracy to defraud (common law) – maximum 10 years’ custody
- Fraud Act 2006, Section 1 (statutory) – maximum 10 years’ custody
- Cheating the public revenue (common law) – maximum life imprisonment
HMRC offers an anonymous reporting tool for employees to report fraud, and has already received thousands of tip-offs. It is expected that the government will begin a campaign to highlight this issue in the coming days, and encourage more people to come forward – heightening the risk to anyone who has committed furlough fraud.
How Loch Associates Group can help
If you are concerned about your use of the furlough scheme, or just need reassurance that you and your business has acted within the rules, then get in touch with our team today and our Employment Lawyers and HR Consultants can carry out a review for a fixed fee, starting from £200, to give you that reassurance.
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