Businesses should be wary of furlough fraud

Employers that have been claiming incorrectly could face HMRC investigation, says partner at law firm Kennedys.

Alison Loveday is a partner at global law firm Kennedys.

Almost 2,000 claims of furlough fraud have been made against employers since the coronavirus job retention scheme (CJRS) was introduced in March. 

But the number of reports could spike dramatically when the scheme comes to an end, with disgruntled employees looking to get their own back.

There are undoubtedly businesses out there that will have seen the scheme as a way of getting the government to pay their employees’ salaries while getting them to work at the same time. 

While many employees may feel scared to report their employer right now, if they were to be made redundant that may well change. They would probably be more willing to dish the dirt.

The figures of those reporting furlough fraud are likely to be the tip of the iceberg, and I would expect to see a spike in reports after the CJRS finishes and redundancies start. This could be a mixture of genuine claims of fraud and spurious ones, with employees creating mischief in an attempt to get their own back.

While some employers may have been exploiting the scheme, I have seen some that have refused, as a matter of principle, to take government money from the CJRS, so the response from businesses has been varied.

Of course, some employers may have made genuine mistakes, so all companies should make sure they have been claiming correctly. The scheme has evolved over time and there have been several changes through its short life. As a result, it will have been easy to make genuine mistakes. Employers need to take advice from their accountants or lawyers and make sure they have put in the correct claims.

Businesses should also try to be open and transparent with their employees if they may need to make people redundant. In my experience the best way of handling these situations is to try to take your staff with you and let them know what is going on. That way if redundancies happen it will be less of a shock. It is much better to have this approach than to suddenly call your employees ‘out of the blue’ to advise them that redundancies are imminent.

Employers that have misused the CJRS should not be surprised if they are investigated by HMRC. HMRC put up the portal for claims very quickly and didn’t have time to check everything. It said at the time it had the power to investigate later. It also urged employees who were not happy to report their employer. 

Ignorance is no excuse, and with HMRC warning that individual directors will be ‘jointly and severally’ liable, it is essential that businesses make sure they have been claiming correctly.

This article was written by Alison Loveday at Kennedys. The views expressed in this article do not necessarily represent those of C&IT Magazine.

This article was originally published by C&IT's sister publication People Management.

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