Furlough fraud investigation solicitors

Furlough fraud includes any attempt by a company to defraud HMRC by claiming erroneous payments for employees on furlough.

Investigations will seek to identify incidences of misuse of the scheme, where companies have claimed in such a way that contravenes the terms of the Coronavirus Job Retention Scheme.

The main term of which is that ‘employees on furlough are prohibited from conducting any work activities for their employer’ – highlighted by the ‘Treasury Direction’ under sections 71 and 76 of the Coronavirus Act 2020.

The main types of Furlough Fraud are:

• Where furloughed staff are requested to continue to work from home or to volunteer their services unpaid.
• Where staff have been furloughed (through the scheme) but the employee has not been informed of this and have continued to work.
• A company claims wages through the furlough scheme for a ‘ghost’ employee. (likely to involve fraudulent claims for an employee who does not exist, either where a claim is made for an employee who was dismissed before the 19th of March 2020, or a claim made for a non-existent person allegedly contracted to work for the company after the 19th March).

Other scenarios include:

• Where a company backdates a claim to cover a period when an employee was in fact still working.
• Furloughed employees receiving only a lesser amount of what they are truly owed under the scheme.

Rules also exist in relation to what kinds of volunteering or training furloughed employees have been able to undertake during the scheme, while HMRC intends to extend the reach of their audits and investigations to cover (SEISS), the ‘Self-employment Income Support Scheme.’

We would encourage employers and individuals to take positive steps to ensure they have remained compliant during CJRS & SEISS. Even if concerns exist, or rules have been broken, the impact on you and your business can be lessened by getting ahead of the gathering clouds. We can get you to where you need to be.

We fully appreciate the furlough scheme was introduced with little time for business to react and respond, but acting now to examine and audit your internal procedures for accidental or mistaken claims can stave off unwanted attention from HMRC investigators before it’s too late.

Flint Bishop is a Top 200 UK national law firm with expert teams of dedicated solicitors in Leeds, Sheffield & York.

We have the full range of Corporate, Commercial, Employment Law & Regulatory Law expertise to comprehensively deal with all aspects of Furlough Scheme internal audits or investigations from HMRC and other government agencies.

We combine our knowledge with the highest levels of client care to provide you with a professional, detailed, and robust service

Our Corporate Defence and Regulatory department are nationally recognised by The Legal 500. Our team defends corporate clients, their important people and individuals when facing investigation or prosecution for fraud allegations brought by the Police, the Serious Fraud Office, HMRC, and the Insolvency Service.

Flint Bishop has built a reputation for proactively defending fraud investigations and prosecutions. The team advises companies and individuals at all stages of the process, from devising policies, procedures, and training staff to minimise the risk of regulatory breaches, to crisis management in the aftermath of an incident triggering an investigation by the police or other regulatory bodies.

The team regularly represents clients facing investigation by the HMRC for VAT fraud. The team has the benefit of strong relationships with forensic accountants who have HMRC backgrounds. This allows our team to liaise with the HMRC regarding alternative disposals, where appropriate.

Our Employment law team is multi-award winning and recognised nationally by its peers. We provide a tailored service to our business clients, and our skill and success has been consistently recognised by both the Legal 500 and Chambers and Partners, and we have an enviable and proven track record of acting from some of the region’s well-known businesses.

HMRC Furlough Fraud investigations

HMRC released draft legislation on May 29th, 2020, designed to punish abuse of the CJRS and SEISS. Draft laws furnish HMRC auditors with powers to investigate misuse, manipulation, and exploitation of the furlough schemes for employers and employees and for the self-employed.

HMRC have powers to impose tax-charge instructions or penalties to claw back invalid payments that have been made. Where a company has claimed through the furlough scheme, company officers can be held jointly and severally liable for the tax charge that seeks reimbursement for incorrect claims.

Furlough Fraud is a criminal offence and will be treated as such in cases of obvious and intentional attempted fraud, however the Finance Act 2020, enables civil action against companies where CJRS payment has not been used to pay wages.

The numbers

Over recent times, complaints (citing company misuse of the furlough scheme) have been received on a dramatic scale. The Guardian have reported recently, that HMRC have received more than 4,400 complaints of suspected fraud linked to the furlough scheme, with over 800 reports made in the very first month of the scheme being launched.

More than £27.4 bn has been claimed through the furlough scheme by the end of June, with The Office for Budget Responsibility forecasting the furlough scheme will eventually cost the UK government more than £42 bn.

It is little wonder, Richard Las (acting director of HMRC’s fraud investigation service) is quoted as saying:

“The vast majority of employers will have used the scheme responsibly, but we will not hesitate to act on reports of abuse of it.”

“This is taxpayers’ money and any claim that proves to be fraudulent limits our ability to support people and deprives public services of essential funding”

HMRC is keen to stress their intention is to amicably resolve cases of ‘genuine mistake ‘, opening the door for business to self-report to address mistakes made unwittingly or in haste. Indeed, draft proposals suggest a 30-day window will be offered to allow employers to self-notify HMRC, where it is discovered that funding may have been overclaimed. This is expected to be the first 30-days following the new Finance Act coming into force with Royal Assent.

Furlough fraud is a criminal offence, and as such companies, directors and the self-employed found to have maliciously and intentionally exploited the system, can expect stiff penalties.

Self-reporting furlough fraud

Whether you’re a company director or partner in a business where you suspect furlough fraud could have been committed, it is crucial that you consider the significance of the consequences that may befall you if you choose not to act.

Our team can help to examine your exact situation and then take proactive mitigating steps to help turn your situation around. Self-reporting to the HMRC, could well prove to be the best option.

In self-reporting, you are much more likely to be seen in a positive light. We can help you to work constructively with HMRC auditors to address problems and the potential consequences of shortfalls in compliance that may have taken shape. Taking such steps could dramatically alleviate the likelihood of significant and punitive penalisation on behalf of HMRC and ultimately the courts.

How we can help

Approximately, two-thirds of private sector businesses have relied on the scheme since it was announced with over 33% of those having furloughed at least 75% of their staff.

The sheer scale of participation in the scheme warrants that some businesses or self-employed people will have made mistakes with claims for furlough payments.

If you are worried about the potential for an honest mistake to have been made, or your concerns are more serious surrounding the potential for wrong-doing, or you become actively singled out for investigation and audit by HMRC or the Police, Flint Bishop have a package of measures to support your needs and an unrivalled level of experience to help you get the best outcomes.

Whether pro-active preventative auditing and self-reporting measures are required, or you need seasoned litigators to go into battle on your behalf, rest assured, that in choosing Flint Bishop we can get you to where you want to be.

It is essential that any organisations facing HMRC investigations take advice at the earliest possible opportunity in order to avail themselves of the best possible defence. With this in mind, our Furlough Fraud rapid team, headed by Jeremy Scott, can be contacted 24/7 on 07971 520 407 without any obligation.