Furlough fraud: Warning as companies could be unwittingly committing crime – here’s how

Furlough fraud involves the exploitation of the government’s Job Retention Scheme, first introduced in March. Under the original rules of the scheme, the government covers 80 percent of an employee’s salary up to £2,500 per month. However, the rules dictate the individual is not permitted to undertake any work for the company during the time they are furloughed.

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While July ushered in fresh rules on flexible furloughing, employees are still not permitted to work while on furlough.

However, there have been thousands of reports received by HMRC of the scheme being exploited.

Some companies have forced their employees to work while placing them on furlough, while others have failed to tell workers they are on furlough until they received a reduced paycheck.

And HMRC has stated a man has been arrested on suspicion of furlough fraud and money laundering offences recently.

But while many instances of reported furlough fraud have involved unscrupulous employers, some could be committing the crime without their knowledge.

Express.co.uk spoke to Patrick Cannon, a tax barrister based in London to gain further insight into government rules and instances of furlough fraud.

He revealed some companies may be unnecessarily putting themselves at risk through possibly committing furlough fraud in one simple action.

Mr Cannon said: “An interesting area where people are innocently committing furlough fraud is employers saying to their team they shouldn’t work, but for team spirit or other reasons, they should have a weekly Zoom meeting to keep everyone in touch.

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“Now, I think that is provably against the rules as people are carrying out work duties by having a team meeting. That is entirely innocent, and no one is trying to defraud anyone there – one would understand why. But technically, it is likely to be a breach.

“It then raises the question of whether these people should self-report this within 90 days. They should probably do so to be on the safe side. 

“However, if they do, then they could stand to lose all of the money they received in furlough. If this is a particular type of business such as a pub or hairdresser, this could potentially put them at substantial risk of insolvency.”

HMRC has previously stated it will be lenient with genuine mistakes surrounding furlough fraud.

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The Revenue told the FTAdviser it was not trying to “catch out” company directors, and that it would only punish in serious circumstances.

But Mr Cannon believes the Revenue are likely to be strict and bear down on companies with full force.

He added: “It states it is going to be lenient, but in real practical experience, I have found they are not lenient at all.

“If they do decide to investigate, it is after they’ve had a really good look behind the scenes. It will be difficult to shake them off.”

However, many companies may be worried the rules on furlough fraud could leave them open to false accusation.

In this case, Mr Cannon’s website states: “If you find yourself as the innocent victim of an HMRC investigation, the best advice is to “lawyer up” as soon as you can and channel all communication through them.”

People who believe their employers are committing furlough fraud are encouraged to report these instances through the dedicated online HMRC hotline.

All reports are received in confidence, with action taken if necessary after investigation. 

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