HMRC investigation of furlough fraud scheme results in first arrest

By 13th July 2020 General News

The Covid-19 pandemic has brought with it a number of challenges throughout the world, including a new type of criminal activity in the UK, Coronavirus Job Retention Scheme Fraud known more colloquially as ‘Furlough Fraud.’

In order to claim furlough payments on behalf of employees, companies must be known and authenticated by HMRC, and workers need to have been on the company payroll on or before 19 March 2020.

On 9 July 2020, following a HMRC investigation into payments made under the Coronavirus Job Retention Scheme, a man has reportedly been arrested on suspicion of committing Furlough Fraud to the value of £495,000.[1] The arrest appears to have been part of a broader HMRC investigation into suspected multi-million pound tax fraud and alleged money laundering offences, with search warrants being issued, computers and digital devices seized alongside business and personal records, and funds relating to the business being frozen. Over 100 HMRC officers have reportedly been involved in the investigation to date.[2]

The arrest constitutes the first of an expected surge in Furlough Fraud related arrests, with HMRC recently reporting that its fraud hotline had received over 1,900 reports of fraudulent furlough claims.[3]  The body is seeking additional powers to investigate furlough fraud and has publicly stated that it is committed to investigating companies for fraudulent practices, and to reclaim wrongfully claimed funds from the public purse.

HMRC recently reported that more than £27.4bn has been claimed through the Coronavirus Job Retention Scheme supporting 1.1 million employers and 9.4 million furloughed jobs.  In addition, 2.4 million people of a potentially eligible 3.4 million self-employed individuals have also claimed support through the Self-Employment Income Support Scheme (“SEISS”) with the value of these claims totalling £7 billion.[4]  HMRC has also announced that is also considering misuse of this scheme from a fraud detections perspective.

[1]  https://www.theguardian.com/politics/2020/jul/09/man-arrested-in-solihull-on-suspected-half-million-pound-furlough
[2] https://www.personneltoday.com/hr/first-furlough-fraud-arrests-are-made/
[3] https://fulcrumchambers.com/hmrc-is-looking-at-furlough-fraud-and-company-directors-may-be-jointly-liable-over-1900-furlough-fraud-claims-reported/
[4] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/891603/SEISS_Official_Statistics_June_2020.pdf

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