Since it was launched in April this year, the much talked about furlough scheme has been utilised by 1.2 million employers across the UK. So far, the scheme has paid out £35.4 billion, enabling 9.6 million jobs to be furloughed. The Coronavirus Jobs Retention Scheme, as it is officially known, was designed to support employers and employees who couldn't do their jobs and prevent mass redundancies. However, HM Revenue and Customs has announced that it is now reviewing 27,000 "high risk" cases where abuse or fraud is suspected. This comes after the Government declared that up to £3.5bn in Coronavirus Job Retention Scheme payments have been claimed fraudulently or paid out in error.
The Coronavirus Jobs Retention Scheme initially allowed the government to pay 80 per cent of workers' salaries up to £2,500 a month. However, one of the main requirements of the scheme is that an employee must not work for their employer while they are furloughed. Since July, furloughed employees have been able to return to work on a part-time basis with the furlough scheme covering the days they are not working as long as the employee does not carry out any work on these days. Yet former Labour Home Secretary Lord Blunkett believes criminals have used the global pandemic to "dip below the radar" and take advantage of unprecedented circumstances - according to a study by academics at Oxford, Cambridge and Zurich universities the ban on working was routinely ignored and people felt forced to work by their employers. The research revealed one in three furloughed employees have been pressured to keep working. There have also been several cases of employers not informing people they are on furlough until the employee received a reduced pay check.
HMRC recognised that the scheme would be vulnerable to scams due to the scale of the payment packages and how quickly the measures were steered through to save the economy. HMRC's permanent secretary, Jim Harra, said "We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%....That will range from deliberate fraud through to error." As a result, HMRC has pledged leniency to those who make genuine mistakes with their applications as it understands this was something new for everyone in a very difficult time. It insists that it was "not trying to catch out" anyone hence its 90 day amnesty period, allowing employers to repay wrongfully submitted claims without penalty. That being said, HMRC has declared that it "won't hesitate to take criminal action against the most serious cases".
July saw the first arrest relating to the Coronavirus Job Retention Scheme: a West Midlands man was arrested as part of an investigation into a suspected £495,000 defrauding of the furlough scheme. This shows HMRC will not be taking concealment lightly. Furthermore, in the last few days it has come to light that a company director and an accountant have been arrested over a suspected £70,000 fraud connected to the furlough scheme. Richard Las, acting director of the fraud investigation service at HMRC, said: “This is taxpayer’s money and any claim that proves to be fraudulent limits our ability to support people and deprives public services of essential funding."
As the scheme begins to wind down and concerns over mass unemployment grow, MPs and business groups have urged the government to continue the scheme in some way. However, the Chancellor of the Exchequer, Rishi Sunak has insisted it will end on 31 October. Nevertheless, it seems that investigations into Coronavirus Job Retention Scheme fraud will continue and other government initiatives such as the Bounce Back Loans Scheme and the Coronavirus Business Interruption Loans Scheme may suffer a similar fate.