Up to £26.6 million of taxpayer funds has been claimed by hundreds of companies that were set up after the government’s Coronavirus Job Retention Scheme which was announced on 1st March 2020.
The scheme was established during the COVID-19 pandemic in order to help corporations pay their employee’s wages. In total, the scheme paid the wages for 11.7 million jobs which cost over £69 billion. However HMRC estimates more than £6 billion has been wrongly claimed through the scheme as a result of fraud and error.
According to The Times, 7,000 companies registered to only five addresses in London have made claims of up to £473 million between them. 340 out of the 7,000 businesses were created after the scheme was introduced.
A large amount of claims made to the scheme were made by “off-the-shelf” companies. Three of the five addresses are said to be linked to “formation agents” who offer the service of setting up companies on behalf of directors.
These type of agents can be linked to organised crime and money laundering due to the fact the agent can establish complex corporate structures which can make it harder for the police and HMRC to track criminal activity, including furlough fraud.
To put the difference in claims made into perspective:
- Generally, companies created on or after 1st March when the scheme was introduced claimed between £5.7 million and £26.6 million between last December and June.
- The 7,000 companies registered at the five London addresses are recorded to have claimed between £40 million and £473 million from last December to June.
For example, it has been reported that one individual who had businesses registered to one of the five London addresses, is estimated to have claimed £27.4 million over 14 months despite the fact his businesses had no staff or any substantial trade. The individual is suspected of using fake or stolen national insurance numbers in order to access the scheme’s funds. HMRC were apparently able to seize £26.5 million of funds back from his companies.
Formation agents often attract criminal activity as it can be seen as a cheap way in order to gain the trust of others as the company will be set up with a prestigious address and a credible name, which makes it easier for fraudulent activity to take place.
It is not suggested that all companies set up through formation agents have been done for the purpose of crime as many furlough claims stemming from corporations set up in this manner are likely to be legitimate. However, in light of HMRC’s findings, companies that have been set up through a formation agent entirely for legitimate purposes that have submitted a claim should be prepared for heightened investigation into their furlough claims.
Individuals and businesses investigated due to concerns of furlough fraud may find themselves accused of committing offences such as:
- Money laundering
- False accounting
- Conspiracy to defraud
There will inevitably be further investigations into the companies incorporated under the five London addresses after the scheme was established. The National Crime Agency has been working with the Treasury to “drive down the risks” associated with the company formations industry. HMRC have stated they “are using the full range of powers to recover incorrectly paid claims” as they have been ordered to recover £1 billion in fraudulent or mistaken claims.
I’ve been accused of furlough fraud - how can Stephensons help?
With the increased investigatory action into furlough claims, it is possible for more criminal proceedings to be brought against individuals and corporations as a result of concerns the scheme has been misused. Our team of experienced fraud solicitors can assist at every stage of proceedings in order to protect your best interests. We have a proven track record when defending both individual and business fraud cases.
For a confidential discussion with a member of our team please complete an online enquiry form or call 0161 696 6188.