Employers may now be fined and could even face jail sentences due to COVID-19 loan fraud

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Employers who have received or retained payments in relation to the Coronavirus Job Retention Scheme (CJRS) to which they were not entitled, have until Tuesday to make repayments or they could receive fines or be arrested and receive a prison sentence, say tax and advisory firm Blick Rothenberg.

Fiona Fernie, a Tax Dispute Resolution Partner at the firm said: “HMRC have shown that they are taking this very seriously and they are willing to use both civil and criminal powers to pursue incorrect claims. They are already investigating approximately 27,000 high risk claims where they believe that either the claim is fraudulent, or a serious error has been made; and have started sending letters to employers opening enquiries. Arrests have also been made in relation to alleged furlough fraud; (the first in July and another in September).

“Even where a criminal investigation is not undertaken, if an employer deliberately claimed a CJRS grant to which it knew it was not entitled and does not notify HMRC within the 90-day ‘amnesty’ period, the penalty could be up to 100% of the grant improperly claimed.

“HMRC’s activity is going to ramp up now that the first ‘amnesty’ period is drawing to a close. Any employers who are unsure of the validity of their claims should spend the weekend checking them rigorously. The check should encompass the numerical accuracy of the claims and the justification for making them and should also ensure that a complete set of records supporting the claims has been maintained.

“HMRC are encouraging anyone who feels their employer may have been fraudulently claiming furlough to report it, and they will follow up any tip-offs they receive, particularly after Tuesday’s deadline has passed.

“More than 80,000 employers had voluntarily repaid in excess of £215m in respect of incorrect furlough claims up to the 15th of September 2020, but this is still a fraction of the £3.5bn which HMRC estimated may have been overclaimed up to that point. Having given employers the chance to review and rectify their claims, HMRC will now be tougher with those who have not availed themselves of that opportunity.

“Indeed, where HMRC suspect furlough fraud, they may also enquire into the personal tax affairs and wider business interests of those involved, as demonstrated by the first arrest in July. The rules apply to both employers using the CJRS and the self-employed who applied under the Self-Employment Income Support Scheme (SEISS).

“The Finance Bill received Royal Assent on 22 July 2020, which triggered the start of the 90 day ‘amnesty’ period for businesses to notify HMRC that they received furlough scheme payments to which they were not entitled prior to 22 July.

“For payments received after 22 July, there is a rolling 90-day period, meaning that employers should really check all of the claims they have made throughout the life of the scheme now and notify HMRC of any errors, rather than having to revisit their claims each month.”

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