Furlough fraud: Deadline to report incorrect claims to HMRC is days away – who is at risk?

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Millions of jobs have been placed on furlough leave this year, as businesses were hit by the financial impact of coronavirus and the subsequent UK lockdown. The scheme is now winding down, following a number of changes coming into force in recent months.

It will end altogether on October 31, 2020.

Chancellor of the Exchequer Rishi Sunak has announced a different scheme will launch the following day – known as the Job Support Scheme – and this is something which was expanded last week.

Ahead of this though, there’s a very significant date that some will need to note.

That’s because today marks one week until the end of the 90 day period for individuals and businesses to disclose incorrect furlough claims to HM Revenue and Customs (HMRC).

Should taxpayers not come forward and disclose their errors by Tuesday October 2020, they risk a “gloves off” investigation from HMRC, accountancy and business advisory firm BDO has warned.

Richard Morley, Partner in Tax Dispute Resolution at BDO, commented: “On July 22, the Finance Bill received Royal Assent, which triggered the start of the 90 day period for businesses to notify HMRC that they received furlough scheme payments which they were not entitled to receive or retain.

“For claim payments received prior to July 22, 2020, the 90 day period concludes on October 20, and after this it will be ‘gloves off’ for HMRC to check up on any claim made and pursue incorrect claimants using both criminal and civil powers.”

So, who exactly could face needing to contact HMRC?

“This applies to both employers using the CJRS or furlough scheme, and the self-employed who applied under the SEISS (as well as those who received other direct support grants in error),” Mr Morley said.

He went on to suggest recently action taken by HMRC could serve as an important reminder to act sooner rather than later.

Mr Morley continued: “Given that HMRC has clearly started to actively follow up on tip-off’s and potentially incorrect claims, including recent arrests, businesses and individuals should start reviewing their furlough claims now.

“For business owners, many of whom may have implemented claims in a rush at the start of lockdown, check and double-check the amounts are right.

“Making sure the paperwork is accurate and Government guidelines are adhered to is key.

“For those where HMRC suspects fraud, we can expect more in-depth investigations into not just the furlough/SEISS claims but also the wider business and personal affairs of the individuals involved.

“The legislation includes powers to pursue company office holders where businesses become insolvent, with joint and several liability.

“As well as following up whistle-blower reports, we expect HMRC to use its ‘Connect’ computer system to flag anomalies in claims, while looking at industry and sector norms.

“Anyone needing to make a disclosure of an incorrect claim should seek specialist professional advice without delay.”

Back in August this year, HMRC announced it would be writing to selected CJRS claimants who they think may have claimed too much, based on information held by HMRC.

HMRC explained it would contact 3,000 selected employers each week from August 20 and they would be able to correct any mistake they’ve made without fear of a penalty, if they notify HMRC and repay the money on time.

The guidance explained: “The deadline to notify us is the latest of the following:

  • 90 days of receiving the CJRS money they’re not entitled to
  • 90 days of when circumstances changed so that they were no longer entitled to keep the CJRS grant
  • 20 October 2020 if they received CJRS money they’re not entitled to, or if their circumstances changed, on or before 22 July.”

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