Furlough fraud amnesty to be extended to 90 days

4 August 2020, 13:55

The government has announced that an amnesty put in place for employers to own up to furlough fraud has been extended to three months.

The amnesty will be introduced as part of the Finance Act 2020.

HMRC has already started investigating businesses that it believes have deliberately or inadvertently allowed staff to work whilst on furlough.

The new laws mean that employers who have knowingly or unknowingly misused the furlough scheme will be given a 90 day window to admit their mistakes.

Prior to the law change, the period to own up was only going to last for 30 days.

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It comes after reports that employers have been asking furloughed staff to work, despite this being directly against the rules of the job retention scheme.

A poll conducted by Crossland Solicitors of 2,000 furloughed employees found that 34 per cent had been asked by their employer to commit furlough fraud by continuing to work whilst on furlough.

A further 18 per cent said they had been asked to work at another employer linked to their company despite being furloughed.

A further 18 per cent have been asked to cover someone else's job.

The new legislation, which received Royal approval on 22 July, will also increase HMRC's powers to check that any coronavirus related grants made to employees have been issued correctly.

In the case of the furlough scheme, this means checking that worker's wages have been paid correctly and employers have not been overpaid in any form of reimbursement.

The latest government figures on the furlough scheme show that up to 21 June, 1.1 million employers have received £22.9 billion since the scheme started.

A further £7.6 billion has been paid to 2.6 million self employed businesses under the Self-Employment Income Support Scheme.

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Andy Wallis, a Partner in the Corporate Tax team at Kreston Reeves, explained: “The Coronavirus Job Retention Scheme has been a lifeline for many businesses, yet there is increasing evidence that it is being abused, for example, by employers asking staff to work whilst on furlough.

"Whilst it is clear that this is wrong, businesses may easily find that they have inadvertently breached the rules as little guidance was available when the first claims were being submitted.

“HMRC has a duty to investigate where it believes fraudulent activity is happening, so it is not surprising that investigations are already underway.

“The Finance Act introduces a 90-day amnesty that puts the onus on businesses to notify HMRC of any over-claim. Businesses that do not notify will be treated as deliberately concealing overpayments from HMRC and can attract penalties of up to 100 per cent of the amount over-claimed.

“HMRC is sending a clear message to businesses – take advantage of this amnesty or face investigation. It is clear that HMRC hopes its amnesty will raise significant revenues.

“It is vitally important that businesses keep good and clear records of staff on furlough, particularly as it is now possible to allow staff to return part-time. Businesses should also be able to demonstrate clear communication to staff on furlough that explains the rules.”