HM Revenue & Customs made five arrests and carried out more than 7,300 investigations into suspected abuse of the furlough scheme during its first 12 months of operation, figures have shown.
According to data obtained via a Freedom of Information request by law firm BLM, HMRC undertook 7,384 “compliance interventions” related to the Coronavirus Job Retention Scheme (CJRS) by the end of Q1 2021.
Compliance interventions are investigations carried out by HMRC to protect or recover funds lost through fraud, tax avoidance, evasion and non-compliance. Some would have related to errors made by employers submitting claims.
As of 28 March 2021, five people had been arrested in relation to suspected abuse of the CJRS. HMRC did not confirm whether any had been prosecuted, according to BLM.
Iskander Fernandez, partner and lawyer at BLM, said: “As is the case with any scheme where fiscal support is provided, loopholes will emerge that can be fraudulently exploited.
“In hindsight, it is easy to say that more should have been done by way of due diligence on each applicant but given the scale of the pandemic and all the uncertainty the nation was gripped with, it is hardly surprising that gaps emerged. Some fraudsters will have taken full advantage of the situation to line their own pockets.
Fernandez said that it would not be unreasonable to suggest that the UK government had lost “billions” to fraudulent activity when taking various other business safety nets into account, such as the Bounce Back Loans and Coronavirus Business Interruption Loan Scheme.
“Whilst some of these interventions could well be the result of unintentional error, the Treasury’s decision to invest £100m into a specialist coronavirus fraud taskforce shows that the government is clearly keen to crack down on any misuse of these schemes,” he said.
“It’s still unclear as to whether this funding will be sufficient to tackle the level of suspected of fraud, however, and what the make-up of the specialist task force will be. Will it be pooled from existing resources, causing an imbalance in other teams, or will there be a recruitment drive by HMRC?”
Almost £18 billion has so far been paid out under CJRS.
From Thursday 1 July, employers must pay 10% of wages for furloughed staff while the government pays 70%, and from 1 August employers and the government must pay 20% and 60% respectively. The scheme will be withdrawn completely on 30 September.
The Resolution Foundation has warned of “dangerous complacency” as the furlough scheme is scaled back, and suggested that the labour market has not recovered as much as employers have been led to believe.