Category: Furlough fraud

furlough fraud lawyer

What furlough fraud might involve and HMRC’s approach to tackling it

Posted by Matthew Berlow on

So as everyone knows by now that the scheme is coming to an end in September, furlough pays 80% of the wages of workers placed on leave since March up to a maximum of 2,500 pounds per month. And now we’re in the situation where thousands of businesses are under investigation for either falsely or mistakingly claiming. 

The potential scale of furlough fraud

The scale we’re looking at is in the region of 3.5 billion in payments that have been claimed. Fortunately, this is a huge amount of money. Since the beginning of September, HMRC told NPS, who sits on the public accounts committee, estimates that five to 10% of furlough cash has been wrongly awarded. That’s a huge amount of money. This five to 10% ranges from deliberate fraud all the way through to error. 

At the point that HMRC gave this evidence, about 8,000 calls have been received to their fraud telephone hotline. And they were looking into 27,000 high-risk cases where they believe there has been a serious error made in the amount employers had claimed this number has probably increased because we’re talking about months on from that.

It’s not really that surprising given the speed with which the scheme was rolled out and to provide a much-needed lifeline as quickly as possible when the lockdown began. That kind of sudden introduction made it very vulnerable to both mistakes and scams.

What types of fraud HMRC are looking at

There are four main areas of conduct that might amount to furlough fraud. So the first is creating ghost workers or claiming for staff who’ve actually left the business.

Secondly, claiming whilst individuals were actually working as normal on a part-time basis or as volunteers. Thirdly, there’s making backdated claims to include the time when individuals were actually working. Finally, there’s the example of asking staff to take a pay cut beyond 80% whilst still claiming the maximum furlough grant.

Research conducted by a legal rights lawyer estimates 36% of employees on furlough were under pressure from their employer to continue working for them. Out of 2000 furloughed employees interviewed, 27% were asked by employers to send and respond to emails. Employers asked 17% to make phone calls. 12% were pressured to attend their physical workplace, and 11% to volunteer their time. 

What HMRC’s approach to furlough fraud

There’s actually been an interesting statement made by HMRC permanent secretary. Who’s Jim Hauer. Their risk assessment stated they would not try to find employees who have made legitimate mistakes in compiling their claims because this is obviously something new that everybody had to get to grips with within a challenging time.

Employees are expected to check their claims and repay any excess amounts. What they will be focusing on is tackling abuse. They’re not looking at mistakes; they are going to be focusing on fraud. And in that vein, HMRC has promised to crack down, and we have already seen some pretty high profile arrests.

High profile furlough fraud arrests

In July, for an amount of just under half a million pounds, furlough fraud, there was an arrest, and in September, two London-based directors were arrested for 70,000 pounds worth of furlough fraud. So HMRC is already taking action. If you are found guilty of making fraudulent applications, the individuals involved can face tough criminal sanctions, including a fine and a potential criminal custodial sentence.

Now, if you’re looking at an offence under the fraud act, that criminal penalty term could be up to 10 years. So a very long term there. HMRC has information on inspection powers meaning that they can perform spot checks and compel information disclosure. And also another comment made by Jim Hara is that HMRC will be writing to employers to give them the chance to correct a mistake and repay excess amounts before taking more drastic action.

Whilst HMRC can’t get involved in any relationships between employers and employees; they can and will reclaim any grants that the employer is not entitled to. Including, for example, grants that haven’t been passed on in wages to employees.

 

Furlough fraud whistleblowing

Posted by Matthew Berlow on

Furlough fraud is becoming more prominent, especially as flexible failing comes in, where employers are allowed to bring employees back for some hours. If your employer is claiming money back from HMRC and asking you to work, it amounts to fraud. So what do you do as an employee in this situation? Because clearly you don’t want to upset your employer, but you also don’t want to facilitate fraud.

If you’re an employee

What you need to be doing, first of all, is refusing to work whilst on furlough and making sure that’s really clear in writing, by putting it in writing. It is also recommended you provide enough information about the request to work and state that you believe it is a breach of a legal obligation and could amount to criminal conduct.

If you do that, what that then means is you’re protected potentially under the whistleblowing legislation because you’re effectively blowing the whistle about criminal activity. Fraud is a criminal event. So what that means for you is that if your employer then decides to dismiss you, demote you or not pay you as a result of that, or you suffer any detriment because you’ve complained about the fact that they’re acting illegally, you are then protected and you can bring a claim for injury to feelings and loss of finance financial losses.

If you’re an employer accused of furlough fraud

As shown above, it is quite clear what furlough fraud is. HMRC are going to take a tough stance on furlough fraud as it has cost hundreds of billions. Any chance they get to take back some of that money and punish people who unlawfully took furlough fraud payments they will take. Should you be accused of furlough fraud there are important steps you should take. Firstly, calling us and explaining your circumstances. Having experienced lawyers who have worked on fraud cases should be your first priority.

It is important to not challenge your employees as this could exacerbate the situation and further breakdown the relationship. Gather any evidence, such as emails sent, letters sent requesting people to work so that we can view them. We are experienced lawyers and trusted by thousands each year so call us immediately if facing furlough fraud charges.