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What is furlough fraud?

View profile for Correna Platt
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What is furlough fraud?

The Coronavirus Job Retention Scheme (CJRS), also known as the furlough scheme, is the provision made by the UK government to assist businesses with retaining workers during the COVID-19 pandemic. The scheme pays a percentage of the wages of employees (currently 80%) that are furloughed by their employer due to coronavirus, with the aim of avoiding the need to make staff redundant at this time. One of the requirements of the scheme is that furloughed employees are not allowed to work for their employer at this time. They may work elsewhere if their employment contract permits this.

At the time of writing, approximately 3,000 whistleblowing reports have been filed with HMRC, alleging that some employers have been breaking the rules of the scheme and essentially committing fraud. This ‘furlough fraud’, as it is becoming known, can mean that the business not only needs to repay any part of the grant they received which wasn’t used for the intended purpose of paying 80% of a furloughed employees monthly wage, but can also be hit with a fine.

At the time when the CJRS came into operation, many companies understandably rushed to get some or all of their employees onto the scheme as quickly as possible. For some businesses, this may have meant that genuine mistakes were made with the claims. Perhaps incorrect details were submitted, or admin errors were made and haven’t been spotted or corrected yet. HMRC have indicated that businesses have 30 days grace to inform them of any mistakes made of this type.

The main ways in which a firm could commit furlough fraud include:

  • If the company furloughs staff but asks them to continue to work during this period
  • If the company doesn’t inform staff that they have been furloughed, so the worker only finds out when they receive their wages
  • If the company claims the grant for employees that are not actually working for them in the required period
  • If the salary details for employees were entered incorrectly, so the business claims more money than they actually paid out for the respective staff member’s wages.

What are the consequences?

Corporations, directors, and individuals can all be investigated, prosecuted and ultimately convicted of fraud. The maximum sentence is 10 years or an unlimited fine.

What to do if you’re accused of furlough fraud

If you are accused of furlough fraud, or HMRC launch an investigation into your business’ use of the scheme, it can be a very worrying position in which to find yourself. It’s important that you seek expert legal advice so that the issue can be dealt with in the best way possible for your situation.

An accusation of fraud is a serious matter for any individual or business and it’s essential that you get specialist legal support that is tailored specifically to your individual circumstances and case. At Stephensons, we have a dedicated business fraud team who are experienced in dealing with cases of this type. Call us today on 01616 966 229 or request a callback.