The government’s furlough schemes have offered essential support to both businesses and the self-employed in the UK during the ongoing pandemic.
However, HMRC is now cracking down on instances of furlough fraud where a business or individual has breached the rules surrounding either the Coronavirus Job Retention Scheme or the Self-Employment Support Scheme by making false representations to HMRC.
In fact, HMRC recently revealed that it has received nearly 800 reports of suspected fraud in relation to the two schemes and that it would be taking further action to ensure compliance with the relevant rules going forward.
What are the rules for claiming under the furlough schemes?
Under the Coronavirus Job Retention Scheme:
- An employee must not do any work for the employer for the hours they are furloughed
- An employee must have ceased all work before the employer can make a claim (up until 1 July when the rules changed to allow partial furloughing)
- A Real Time Information (RTI) must have been filed for the employee before 19 March
- The reasons for furloughing the employee must be related to Coronavirus
- An employee can undertake training while on furlough, but this can’t provide a service to the employer
- The cut-off date for placing an employee on furlough for the first time was 10 June 2020
Under the Self-Employment Income Support Scheme, you can claim if:
- You are self-employed or part of a partnership
- You have been trading since the 2018-19 tax year, traded during the 2019-2020 tax year and intend to trade during the 2020-2021 tax year
- You cannot work or have lost business due to Coronavirus
- Your trading profits are below £50,000
A business or self-employed individual could be found guilty of committing furlough fraud if they breach any of the rules concerning furlough leave.
It’s also important to note that businesses claiming under the furlough schemes are required to retain records for at least six years covering the claim period for each employee, the amount claimed, how this was calculated and the claim reference number.
What are the penalties for furlough fraud?
If a business or self-employed person is guilty of committing furlough fraud, there are a number of potential penalties.
These penalties include:
- Imprisonment
- An unlimited fine
- Director disqualification
- Repaying any payments that the claimant was not entitled to
If found guilty, the directors of a company, members of a partnership or a self-employed person could be prosecuted.
HMRC have stated that it will only look to prosecute “the most egregious cases, where amounts are deliberately over-claimed with the officer’s knowledge, and where the company is insolvent or in serious risk of insolvency and there is a serious possibility it will not pay the tax liability.”
This means that businesses will be allowed to make repayments if a genuine mistake has been made.
What should you do if you are being investigated for furlough fraud?
If you have used either of the furlough schemes, you may understandably be concerned about the possibility of furlough fraud, especially as the rules are complicated and have changed since the schemes began.
Even if you have committed a genuine mistake, an investigation may have a long-lasting impact on your businesses’ reputation, so it is important that you seek expert legal support at the earliest opportunity.
At Gepp Solicitors, our employment lawyers can handle your defence against allegations of furlough fraud, helping you to comply with any investigation carried out by HMRC and work alongside you to build the strongest possible defence.
Any mistake made during the early stages of an investigation can be difficult to recover from, which is why it is vital to secure representation as soon as possible.
If you are being investigated for furlough fraud or need advice about a potential investigation, get in touch with our legal specialists by giving us a call at our office in Chelmsford, or by filling in our online enquiry form.
