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Furlough Fraud – Staying on the right side of the law

In response to an increase in the number of fraudulent claims against the Coronavirus Job Retention Scheme (furlough) in recent months, HMRC have published the potential penalties for employers that commit furlough fraud.

Based on HMRC data, the furlough scheme has supported 9,600,000 employees, however around 27,000 employers are thought to have overclaimed by mistake and are being contacted by HMRC so that they can rectify any errors. In cases where furlough fraud was deemed to be deliberate, arrests have been made, including one individual and 8 accomplices from the West Midlands suspected of defrauding £459,000 from the scheme.

 

What is furlough fraud?

According to the government any of the following actions may result in furlough fraud:

  1. Any amount claimed that the employer was not entitled to receive
  2. Any amount claimed that the employer is no longer entitled to receive due to the employee no longer working for the employer

Penalties will not be applied if the employer did not know of the overpayment at the time it was received or at the time the employee left their employment, providing that they repay it within 12 months of the end of their accounting period for limited companies, or by 31st January 2022 for sole traders.

 

What are the penalties for furlough fraud?

  1. Income Tax Charge – full overclaimed amounts may be recovered by HMRC if they make a tax assessment for the amount overclaimed, due for payment 30 days after the assessment.
  2. Company Officer Liability – if the company is insolvent, company officers can be made personally liable to pay the tax charged on overclaimed grants.
  3. 100% penalty – for failure to notify HMRC of an overclaimed grant as outlined above.

 

What about employers who have underclaimed?

If you think you have underclaimed, you can contact HMRC to amend your claim. This process will entail additional checks on your claim.

 

If you are concerned that you may have overclaimed against the CJRS, please contact your accountant for advice.