Data on HMRC activities shows that 18,464 requests to access communications such as phone records, and internet browsing history were made by HMRC to aid criminal investigations in 2020. This is up from 18,263 the previous year, according to London based law firm RPC. This rise in requests is likely due to an increased focus on furlough fraud by HMRC.
Increased focus on furlough fraud
Employees on furlough are not permitted to undertake any work for their employer, or any associated businesses of the employer. Through data requests, HMRC are able to access data including the time, duration and location of employer phone calls. This could determine whether an employer has been making phone calls to an employee during the furlough period. As such, a high number of phone calls could indicate the employee was working in the supposed furlough period, meaning there would be a fraudulent furlough claim.
HMRC can also request a list of websites visited by an individual from their internet provider to determine whether employees have been completing work.
In a further attempt to deter fraudulent furlough claims, from February, HMRC will also begin publishing details of employers who have claimed under the Coronavirus Job Retention Scheme (CJRS) for claims that cover periods from December 2020 onwards. These publications will continue on a monthly basis.
HMRC has set up a specialist review team which is actively policing this area by using data analysis in risk-assessing claims paid, to identify appropriate cases for compliance check. HMRC are also encouraging employees and competitors to contact them on the HMRC reporting line, to inform them of any irregularities in claims, particularly if employees are being required to work when on furlough. Going forward, all HMRC Employer Compliance Inspections will also include a review of all claims made under CJRS.
How employers can minimise the risk of potential penalties
Employers should ensure that they and their staff have complied with the rules of the scheme.
Where a breach of the rules has resulted in incorrect furlough grant claims being made, HMRC will seek to recover the overpayments received, together with statutory interest and a significant penalty.
Due to the complexity of the furlough rules, many employers will have inadvertently made incorrect claims as a result of misunderstandings. If, as a result of this, the furlough grant has been over claimed, those employers will also find themselves facing what could be significant settlements.
We recommend that employers review their claims now, and, if an error is identified that results in an overclaim of the furlough grant, immediate action should be taken to correct this. If the error is notified to HMRC and corrected within the notification period, penalties can be fully mitigated.
The notification period ends on the latest of whichever date applies below:
- 90 days after you receive the furlough grant you are not entitled to, or;
- 90 days after the day circumstances changed so that you were no longer entitled to keep the furlough grant.
If the incorrect claim is outside the notification period, making an unprompted disclosure and correcting the error, if handled correctly, should result in some mitigation of the penalty. It will also be seen by HMRC as an indicator good corporate governance which will reduce the employer’s overall risk rating.
If you have any questions in respect of this issue, or if you have any concerns about the accuracy of any furlough grant claims made under the scheme, please contact our Employment Tax team.