According to HMRC figures, up to £3.5 billion may have been paid out in fraudulent or wrong furlough claims since the Coronavirus Job Retention Scheme (CJRS – also known as the furlough scheme) was first launched.
According to Jim Harra, Chief Executive of HMRC, he and his staff believe that around five to 10% of furlough leave claims have been paid out to ineligible claimants, potentially due to employers abusing the scheme.
To date, the Government has distributed furlough claims amounting to £35.4 billion, which means that between £1.75 billion and £3.5 billion of that amount may have been paid out wrongly.
Speaking to MPs earlier this week, Jim Harra said:
“We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%.
“‘That will range from deliberate fraud through to error.”
Jim Harra went on to say that some businesses may have accidentally claimed too much through the furlough scheme and that HMRC will also be looking into 27,000 ‘high risk’ cases where they suspect claims have been made fraudulently. He commented:
“What we have said in our risk assessment is we are not going to set out to try to find employers who have made legitimate mistakes in compiling their claims, because this is obviously something new that everybody had to get to grips with in a very difficult time.
“Although we will expect employers to check their claims and repay any excess amount, but what we will be focusing on is tackling abuse and fraud.
“While we can’t get involved in any relationship between the employee and employer, we can certainly reclaim any grant that the employer is not entitled to, which includes grants they have not passed on in wages to their employees.”
The announcement made by Mr Harra and HMRC is the first time they have spoken publicly about potentially fraudulent claims or claims made in error via the CJRS.
For more information on what employees can and can’t do whilst furloughed, have a read of our blog.
Recent study into fraudulent furlough claims
Last month, a study was undertaken by academics at the universities of Oxford, Cambridge and Zurich which revealed that almost two thirds of the 9.4 million workers placed on furlough by their employers continued to work, which is a direct breach of the rules of the scheme.
Winding down of the furlough scheme
The scheme is gradually being wound down and since the beginning of September, the Government is paying 70% (previously 80%) of employees’ salary, up to a monthly cap of £2,187.50, with employers being required to top up salary to 80% up to a cap of £2,500 and pay employer’s National Insurance contributions and pension contributions.
Then from 1st October, the Government will pay 60% of salary up to a monthly cap of £1,875, with employers being required to top up salary to 80% up to a cap of £2,500 and pay employer’s National Insurance contributions and pension contributions.
The scheme will then finish at the end of October.
How Nelsons can help
Laura Kearsley is a Partner in our expert Employment Law team.
If you have any questions in relation to the subjects discussed in this article, please contact Laura or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.