Furlough Fraud implications

07 July 2020 | Jatinder Tara

During the period of 1st March to 30th June 2020, employees on furlough under the Coronavirus Job Retention Scheme (CJRS) could not do any work for their employer that made money for their employer or any organisation linked or associated with employer or provide services for their employer or any organisation linked or associated with the employer.

During the above period of furlough, the employee could take part in training, volunteer for another employer or organisation or work for another employer (if contractually allowed).

Private Sector

Since the introduction of CJRS, it is estimated that two thirds of British private sector businesses have used the scheme with a third having furloughed at least 75% of their workforce and with such high numbers involved, recent research has found that some businesses could be exploiting the scheme to gain money while still forcing their employees to work. Further, as at 29th May Her Majesty Revenue & Customs (HMRC) received 1,868 reports of abuse to its digital reporting service.

Furlough abuse could range from employees having been pressured to work by requiring them to send and respond to emails, making phone calls, requiring them to attend work, pressured to work as a “volunteer,” which is a breach and claiming furlough on their employees’ behalf but without their knowledge, while they continue to work.

HMRC

To address furlough fraud, HMRC has recently published draft details of changes to the Finance Bill 2020 that will give it powers to make a company officer(s) jointly and severally liable for any CJRS payment to which the company was not entitled to or any CJRS payment which was never intended to be used to pay furloughed employee costs, with fines and penalties extending to criminal sanctions and the possibility of custodial sanctions for “the most serious” fraudulent claims under the scheme with HMRC to reclaim over paid furlough money via income tax assessments.

However, despite the above where it turns out that the employer has made a genuine mistake on claiming from the CJRS, HMRC have indicated that they will help put it right and further will be offering a 30-day amnesty period for employers to “admit to deliberate non-compliance of furloughing rules”.

With the need for furlough written agreement records to be kept by employers for 5 years, employers must ensure that senior and middle management have not breached the furlough provisions.

The contents of this article is intended for general information purposes only and should you require further guidance and assistance on the matter, please contact our HR/Legal advice-line on 01455 852028. 

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