News & Insights

Furlough abuse

**Updated 15th March** Ian Machray explains how the Government has turned its attention towards recuperating payments claimed fraudulently.

The Coronavirus Job Retention Scheme (“CJRS”), which enables employers to furlough employees and recover the majority of the employment costs from the government, has provided a vital lifeline to individuals and businesses since it was announced on 20 March 2020. Data published by HMRC shows that just by the middle of August 2020, £35.4bn had been paid out to 1.2m employers supporting 9.6m jobs.

The CJRS is currently due to continue until 30 September 2021, with the level of contributions tapering off from 1 July 2021 onwards. The full cost of CJRS will be confirmed in due course, but it is becoming clear that not all of the amounts claimed have been compliant with the scheme’s rules; the government estimates that several billions of pounds have been incorrectly awarded.

While a significant proportion of incorrectly awarded monies will be a result of administrative errors on the part of well-intentioned employers, there will undoubtedly be cases of employers who have deliberately sought to take advantage of the scheme for financial gain. There are reports, for instance, that some employees have continued to work throughout lockdown, unaware that their employers had in fact claimed under the scheme that they were on furlough for the duration of that period.  Other instances of abuse might include situations where furloughed employees were asked to do tasks unrelated to their ordinary work, or even employers paying their employees less than the full amount received via the scheme.

HMRC have indicated that they will deal robustly with any such misuses of the scheme and they will have wide powers, including significant financial sanctions. Officers of those companies that are found to have been fraudulent may also be subject to criminal liability. Additionally, companies that are exposed as having exploited a generous governmental scheme at a time of national crisis will likely suffer severe reputational damage.

Employers with any concerns over the claims they have submitted should carry out an internal audit of their claims to identify any potential issues before HMRC’s crackdown begins in earnest.