Business owners warned: pay back dodgy furlough cash now or face jail

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BUSINESS owners should hand back furlough scheme overpayments or face jail, a top forensic accountant warned today.

Christine Rolland said HMRC would now be subjecting businesses that used the scheme to the “cold wind of scrutiny”.

The Glasgow-based director of forensic accounting at Henderson Loggie said the message from the tax man was clear: voluntarily repay sums wrongly claimed or or face higher penalties.

Since March last year, employers have been able to claim furlough grants covering up to 80% of wage costs up to £2,500 per month per employee.

Rolland: Pay back wrongly-claimed furlough cash now or, in extreme cases, you could face jail

The latest available figures show that the government paid out £68.5bn in Coronavirus Job Retention Scheme (CJRS) grants up to August 16 this year.

In his March budget, the Chancellor promised a further £100m investment in the 1,250-strong taxpayer protection task force which deals with errors relating to Covid-19 business support schemes.

Rolland warned: “The message from the tax man is clear: volunteer information about any furlough claims that may have been wrongly submitted and repay the amount owed to the taxpayer.”

The alternative, she said, was to “face higher penalties, and possibly prison, if it’s found out later that claims have been overstated or made fraudulently”.

By the end of March this year, HMRC had opened almost 7,500 investigations and is now staffing up to cope with the flood of investigations it expects to come.

By June, 28,000 reports of potential furlough fraud had been received.

Furlough fraud can take a variety of forms.

They include claiming CJRS for employees while requiring them to continue working, with or without them knowing that they were officially furloughed.

Furloughing “ghost” employees, perhaps by not removing former employees when they left or reinstating former employees without their knowledge, would also land a business owner in hot water.

And overstating the number of hours that an employee has been furloughed under the ‘flexible furlough’ rules would also be treated as potential fraud.

A list of all employers who have claimed CJRS since December 2020 is publicly available.

Some businesses will come under the spotlight as a result of tip offs from existing staff or former workers who know that employers have claimed CJRS but their employees have continued to work.

HMRC will also be interested in businesses that have had an increase in income or have maintained a steady turnover while all their employees were furloughed.

Questions may be raised about hospitality businesses that received money from the UK Government for taking part in the Eat out to Help out scheme last August if claiming that staff were furloughed at the same time.

Rolland added: “HMRC’s recent recruitment drive for criminal investigators may be an indicator of its expectation of an increase in the level of investigations to come.

“Employers have 90 days to amend a claim and repay if they realise they may have unintentionally claimed money they were not entitled to, and are strongly advised to take the opportunity to set their record straight.

“To withhold information could be very costly to an employer’s financial position and reputation and may lead to directors being struck off and, in the more extreme cases, loss of freedom.”