Further to our last article on the large scale reports of furlough fraud, the Government is planning to introduce legislation that will provide employers with a 90 day amnesty to self report either deliberate furlough fraud, or mistaken misuse of the coronavirus job retention scheme, the self-employment income support scheme, and the statutory sick pay rebate scheme.
Reports of furlough fraud can be made to the HMRC online here.
Reports Of Furlough Fraud To HMRC
Ahead of the announcement of the 90 day amnesty, HMRC had reported that up to the 29th May 2020, they had received 1868 reports of furlough report. Accordingly, the HMRC has published draft legislation in which it plans to amend the Finance Bill 2020 to allow it to "raise Income Tax assessments to recover amounts from the recipient of a SEISS or CJRS payment to which they are not entitled or where a CJRS payment has not been used to pay furloughed employee costs. HMRC will also be able to charge a penalty in cases of deliberate noncompliance." Under the legislation, the HMRC will also have "powers to make a company officer jointly and severally liable for the Income Tax charge raised in relation to any CJRS payment to which the company was not entitled or any CJRS payment which was never intended to be used to pay furloughed employee costs in certain circumstances. Those circumstances are where the officer is culpable for making a deliberate CJRS claim to which the company was not entitled. These powers apply where HMRC can meet certain tests showing there is a serious risk that the company will be unable pay the Income Tax assessment." That is, where a company cannot repay HMRC themselves (e.g. because of insolvency), then each and every director will themselves become personally liable to repay the monies.
Furlough Fraud 90 Day Amnesty
The Government will be including in the draft legislation amending the Finance Bill 2020, a 90 day amnesty for employers to self report any deliberate furlough fraud or mistaken misuse of either the coronavirus job retention scheme, the self-employment income support scheme, or the statutory sick pay rebate scheme. Whilst employers would still have to repay the monies they had received under the various aforementioned schemes, self reporting during the 90 day amnesty will enable them to avoid any financial penalties that would otherwise be imposed, and any potential criminal sanctions such as imprisonment. Accordingly, employers are well advised to double check during the 90 day amnesty period that any claims they have made under the schemes are correct and legitimate.
When the Government made the original announcement of an amnesty, it stated that there would be only a 30 day amnesty. However, on account of complaints that this period would not be long enough, the Government extended it to a 90 day amnesty.
It is anticipated that the 90 day amnesty period will begin once the Finance Bill 2020 has received Royal Assent, which it is expected to receive during July 2020.
Reaction
Commenting upon the 90 day amnesty, Dawn Register, the Head of Tax Dispute Resolution at BDO Accountants, states that: "The window of opportunity to correct mistakes in furlough claims or other COVID-19 support payments administered by HMRC is to be extended from 30 to 90 days. This is a welcome change that gives businesses a more realistic time period to check their claims and notify HMRC of any corrections. Given the huge volume of government guidance and changes in July already, we consider the extension to a 3 month period is crucial to allow businesses time to review claims and seek professional advice where necessary.....We expect there will be many cases where innocent mistakes are made given the difficult trading conditions for businesses during Lockdown. Also a ‘catch up’ exercise may be needed on paperwork. Businesses should start to check and double check now that their Government support claims are correct."
