How to avoid accidental furlough fraud

Coronavirus

HMRC said it had received 6,749 reports of misuse of the Coronavirus Job Retention Scheme (furlough scheme) up to 22 July, compared to around 4,400 at the end of June.

This rise comes as the government has published further details on the job retention bonus scheme which offers employers with a one-off bonus of £1,000 for every employee who is brought back from furlough and remains in the business until 31 January 2021. The update can be read in full here.

The concern, however, is due to the introduction of the job retention bonus scheme, there could be an increase in fraudulent behaviour in regard to the furlough scheme. We created a blog which discusses furlough fraud in regard to the financial penalties and criminal prosecution, reputational damage which can be caused and how employees may carry out furlough fraud.

Can it be accidental?

As the Scheme was introduced so haphazardly, with an approach of “pay now, check later”, it’s understandable that employers may have made mistakes in their historical claims under the Coronavirus Job Retention Scheme.

There are two main areas where employers may have breached the scheme.

  • Employees working whilst furloughed

It is clear from the guidance that employees cannot generate revenue for their employer whilst furloughed, but what this means has never been clarified. Additionally, we saw that a lot of employers were asking their employees to “volunteer” but we view this as inappropriate under the Scheme.

  • Concerns for flexible furlough

Employees cannot work for their employer during their furloughed hours.  Employers should be specific about hours to work and not work. Employers should ensure that managers are not allowing employees to ask anyone to do anything outside of their agreed hours.

What can an employer do?

An employer should use the HMRC calculator to check that their calculations are correct, reviewing all historical claims and reflect what actually happened.

Where employers realise there was a mistake, this does not mean that they will be liable for fraud. HMRC has been clear that the penalties are aimed at those who deliberately don’t comply. HMRC unlikely to prosecute where applications are made in good faith.

HMRC has given employees a 90-day amnesty (increased from 30 days) to admit their mistakes to HMRC. This starts from when the Finance Bill received royal assent on 22 July 2020, so is until 18 October 2020.

If you have any questions about this article, please do not hesitate to reach out to Alicia.collinson@thrivelaw.co.uk

By Alicia Collinson

 

 

 

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