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The Implications of Furlough Fraud
The Implications of Furlough Fraud

As more and more employees enter back into the workplace, there is mounting evidence that employers have been acting unscrupulously when it comes to furlough. Resultantly, the term ‘furlough fraud’ has started to circulate in public discourse, but what exactly is ‘furlough fraud’?

What are the relevant parameters, and can you be penalised if you commit this type of fraud accidentally?

 

The Coronavirus Job Retention Scheme (CJRS), also referred to as the furlough scheme, is a provision by the UK government to help businesses out during the Coronavirus pandemic, alleviating the need for redundancy. The scheme currently pays 80% of the wages of furloughed employees to employers who submit a claim, and who are thereby responsible for distributing the amount accurately.

As an employer, it is vital for you to understand that when an employee is furloughed, they are prohibited from working for you- they can, however, seek work elsewhere if their employment contract allows.

Despite the difficulties that the pandemic may cause to your business, breaking the terms of the furlough scheme is considered fraud, and therefore a crime punishable by law.

 

Types of Furlough Fraud

The varying types of furlough fraud can be divided into two categories:

  1. Claiming furlough that the business is NOT entitled to, e.g. claiming the wages of an employee that continues to work for you.
  2. Claiming furlough that the business is NO LONGER entitled to, e.g. claiming the wages of a past employee that no longer works for you.

 

Other examples include: claiming furlough for staff that aren’t contracted to be working for you in the length of time stated in your claim; not informing staff that they have been furloughed, leaving them to discover this themselves when they receive their wages; or entering the wages of an employee incorrectly, resulting in the business claiming more money than they pay for the employee’s wages (this may be deliberate or accidental).

 

Accidental Furlough Fraud

It is understandable that amid the panic and uncertainty caused by the Coronavirus, you may have rushed to get your employees signed up to the furlough scheme, and made genuine errors as a result.

It would be incredibly frustrating to receive furlough fraud penalties if your intentions were pure, especially with the added financial strain that the current climate has induced.

Fortunately, HMRC recognise that innocent errors will be made, and are not obliged to distribute extra penalties to those that have made them, providing that the necessary repayment is made.

With that being said, there are limitations to this leniency, and we at Gow & Partners cannot stress enough the need to review your furlough claims, especially considering the constant change in guidance surrounding furlough.

The UK government has introduced a 90-day amnesty on furlough abuse, confirmed in the Finance Act 2020, which received Royal Assent on 31 July. This allows you to repay furlough money claimed by mistake, while also protecting you against the threat of repercussion.

Take control and prevent yourself from becoming just another accidental fraud statistic!

Speak to our professional accountants on 01254 589799 if you have any questions or concerns when reviewing your furlough claims.

 

There have been upwards of 4,500 reports of furlough fraud reported to HMRC

Experts suggest that the true numbers of furlough fraud may be much higher, yet employees are not coming forward due to the threat of losing their livelihoods.

Even with the current figures, it is safe to say that the unprecedented nature of the pandemic is mirrored in the unprecedented number of requests for help filed to HMRC concerning furlough fraud.

We advise that you put the interest of your employees first in your conduct surrounding furlough, and use The Coronavirus Job Retention Scheme for the purpose it was intended for; to support businesses and employees alike.

 

Implications of Deliberate Furlough Fraud

When an instance of furlough fraud is identified by HMRC, not only will the employer have to repay the difference in what they have unjustly claimed, they will be subject to a fine of an unlimited amount.

In the worst case scenario, deliberate fraud can result in prison time of up to 10 years.

Contact our team at Gow & Partners if you are being investigated by HMRC for furlough fraud, and we can direct you towards the appropriate legal advice that you need.