HMRC crackdown begins on furlough fraud

HMRC are reported to be investigating about 4,500 cases of furlough fraud after setting up a dedicated furlough Fraud hotline. This is where people can report businesses that are not properly complying with the rules of the scheme and are defrauding the public purse.

HMRC are duty bound to investigate any such reports from employees or the public, and they do so by assessing the quality of the information. They do this by ascribing value on a fixed scale to a piece of information, evaluating it for the quality of the source and how specific and detailed the information received is.

In terms of the source, one that provides his or her details is evaluated as being more credible than an anonymous source for obvious reasons, but some of these “human sources” also want payment for services rendered which then creates a different dilemma with regard to credibility.

HMRC have announced that they have paid out £473,000 to informants last year which is up from £290,250 in the previous year. Payments such as this are not normally made lightly and are generally only made where the information leads to HMRC collecting extra tax revenue.

Some of the cases that will be evaluated by HMRC will not be investigated by a specialist fraud team, but might simply be the trigger for a later tax investigation. Naturally a certain percentage of the reports will be malicious and unfounded and might be as a result of a former disgruntled employee wanting to cause trouble.

An HMRC investigation can be a stressful time, even for businesses with high compliance, and can cause a good deal of disruption to the day to day running of a business and it is for this reason, we would always advise our clients to subscribe to our HMRC Investigation Service which covers fees in the event of a tax investigation. It means that a qualified tax specialist can manage the investigation and negotiate and converse with HMRC on your behalf.

It should be borne in mind, however, that as with any protection agreement there are circumstances that would invalidate the policy, such as actually committing furlough or other tax fraud. Under circumstances where a business has deliberately committed furlough fraud then the HMRC Investigation Service would not be available.