Dishonest or an honest mistake. It can be a very fine line…

Since March the Government have permitted businesses to claim through the job Retention Scheme (the Furlough scheme) of which we will all be familiar.

There is no question that the scheme has assisted many businesses to survive through that support which is being phased out in October.

It is a sad reflection on society that we have heard of fraudulent activity by criminals seeking to exploit vulnerability during the pandemic with bank fraud and other scams, but there may also be businesses who will be prosecuted for carrying out fraud through the Furlough scheme too.

In fact at the beginning of July, the HM Revenue & Customs announced they had carried out their first arrest for furlough fraud. The arrest was part of an investigation into a suspected £495,000 Coronavirus Job Retention Scheme fraud. HMRC officers executed a search last week, arresting a 57-year-old and seizing computers.

The outcome of that investigation will in time become clear but , in the interim, the impact on the suspect will be significant given funds held in a bank account relating to the man’s business have also been frozen.

Restraining assets is a tool used by enforcement agencies and can be extremely debilitating for companies and individuals whilst the confiscation proceedings take place. The substantive hearings can take months, and sometime years to conclude. Our regulatory team frequently advise those accused of ways to vary restraining orders to enable them to meet their financial commitments, but prevention is always better than cure so we advise businesses to ensure they are acting lawfully and to avoid investigation in the first place.

It must be observed, that criminal enforcement will follow in any suspected fraud where there is a clear intention of criminality. Sometimes mistakes and errors of judgment occur that falls short of fraudulent activity but it is then important to show that all steps were taken to avoid making that error in the first place. The question of whether something was a genuine mistake or a criminal intent is sometimes a fine line. In furlough arrangements the scheme is clearly laid out and professional advisors (accountants and lawyers) are there to advise accordingly.

Post the July arrest, Richard Las, acting director of the fraud investigation service at HMRC, said: “The CJRS is part of the collective national effort to protect jobs. The vast majority of employers will have used the CJRS responsibly, but we will not hesitate to act on reports of abuse of the scheme…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.”

It is clear that any financial schemes will be scrutinised and enforced if criminality is suspected. Companies should monitor developments with the Finance Bill which will provide a 90 day period for businesses to notify HMRC that they received furlough scheme payments which they were not entitled to receive. This should not be seen as some form of safety net nor ‘get out of jail’ card but businesses should review their claims now and assess whether they are sound or have any concerns around them. HMRC are promising to take criminal action in serious cases .

These are undoubtedly challenging times. Businesses have been forced into a covid impacted world and a deluge of new laws and regulations, not least on how to make their workplace safe and must ensure they are taking steps to comply with the laws surrounding their business operation so if law enforcers or regulators pay them a visit, they are ready to refute allegations.

We always recommend that a business appoints a senior individual to deal with any enforcement visit or request for interview, so as to ensure there is a clear line of communication where their business can take legal advice and make informed and cautious decisions on how to address an investigation. Early intervention is key and businesses should not rush into any interview under caution without ensuring they have equality of arms when it comes to knowledge of the procedure and law.

If you have any questions regarding the above, contact our Regulatory team who will be happy to help.

-Mike Hayward

  • This field is for validation purposes and should be left unchanged.