HMRC begins the hunt for furlough fraudsters

A WARNING has been issued to businesses and individuals who have used the government’s furlough scheme as HM Revenue and Customs (HMRC) begins clawback.

It comes after a man became the first person to be arrested in connection with an alleged £495,000 fraud of the Coronavirus Job Retention Scheme.

HMRC said it had arrested a 57-year-old male from Solihull, West Midlands, on Wednesday, in connection with the allegations and added it was the first such arrest to happen.

Now, tax and advisory firm Blick Rothenberg has warned that this could just be the start of more alleged fraudulent claims.

Fiona Fernie, a tax dispute and resolution partner at the firm said: “HMRC has started investigations into companies and individuals that it believes have fraudulently made claims under the Coronavirus Job Retention Scheme (CJRS), which has paid out more than £27bn.”

She added: “The Government now intends to claw back as much money as possible from those whose claims were wrong.

“Nobody who has received these grants should be complacent, the proposals for clawback are not confined to instances where the claim was fraudulent - it applies to cases where there has been a lack of proper care as well.

“Now is the time to ensure that claims under the CJRS are accurate.”

Fiona went on to explain that the government is proposing that the grants are taxable so that where the recipient should not have been entitled to the grant in the first place or has used the funds inappropriately, the full amount of the grant is subject to income tax at a rate of 100pc which she says will effectively clawback the entire amount of the grant.

As this is retrospective, it will apply to all grants made under the scheme.

She adds that the legislation has been drafted with a view to it being enacted as part of the Finance Act 2020 which is expected to become law later in July.

According to Fiona, HMRC have received more than 3,800 reports of fraudulent claims which were made under CJRS which has supported 1.1 million employers and 9.4 million furloughed jobs.

Fiona advised that it is “a good time” for companies to ensure that they have detailed evidence which demonstrates why they considered they were entitled to receive the grants, and how the funds were deployed.

The scheme will remain in place until the end of October but changes will be made from August and employers will be asked to start making contributions towards workers’ wages.