A new report that has just been released by HMRC states that they estimate that furlough fraud and error saccounted for £5.28 billion of the £60.7 billion paid out under the Coronavirus Job Retention Scheme (CJRS), also known as the 'furlough scheme', in the 2020/21 financial year. That amounts to 8.7% of all furlough monies paid out during that year.
Furlough Fraud
In their latest report, HMRC have confirmed that they estimate that furlough fraud and errors amounted to £5.28bn in the 2020/21 financial year. With £60.7bn being paid out under the CJRS during 2020/21, furlough fraud and errors therefore amounted to an incredible 8.7% of all monies paid out under the scheme.
HMRC estimate that the £5.28bn that was lost to fulough fraud and errors was made up as follows:-
- Organised crime - £0.18bn (3.4%)
- Opportunistic fraud - £3.7bn (70.1%)
- Errors - 1.4bn (26.5%)
Accordingly, of the £60.7bn that was paid out under the furlough scheme, 0.3% was lost to organised crime, 6.1% to opportunistic fraud, and 2.3 to errors.
The CJRC finally closed on the 30th September 2021. Accordingly, the furlough scheme continued for another 6 months beyond the end of the 2020/21 financial year. It is unknown as to what the scale of the furlough fraud and errors were for that final 6 months
The types of furlough fraud committed included the following:-
- Employers claiming for the salaries of employees under the CJRC, despite the fact that those employees were still working. This constituted the largest element of fraud according to the HMRC (approximately two thirds).
- Exaggerated claims
- Employers not passing on furlough monies to their employees
Money was also lost to fraud and errors under the other coronavirus support schemes. Under the Self-Employment Income Support Scheme (SEISS), HMRC paid out £19.7bn, of which £0.49bn (2.5%) was lost to fraud and errors. In relation to the Eat Out to Help Out scheme, £840 million was paid out, of which £71.4 million was lost to fraud and errors.
Furlough Scheme Closed
The CJRS closed on the 30th September 2021. At that time, 1.14 million employees were still on either full or flexible furlough accordining to the Office for National Statistics (ONS). Around 40% of those employees were on full furlough. As of yet, there are no precise figures as to how many of those employees were made redundant once the CJRS ended, but the Resolution Foundation estimate that it was in the region of several hundred thousand, with older workers likely to be impacted most.
Indeed, according to a new report from the Legal & General and the Centre for Economics and Business Research (CEBR), 11% of all over 50s who have been made redundant over the last 5 years have left the labour market altogether, with 62% believing that their age played a role in their employers decision to make them redundant.
Furlough Fraud: Reaction
A representative for the HMRC stated in response to the furlough fraud issue that: "The Covid support schemes have helped millions of people and businesses through the pandemic, and the government was clear that the priority was getting money to those who need it as fast as possible...The Taxpayer Protection Taskforce is expected to recover £1bn from fraudulent or incorrect payments over the next two years, and work is already under way, with 23,000 ongoing investigations."
Gareth Davies, Comptroller & Auditor General at the National Audit Office (NAO) added: "The COVID-19 pandemic has significantly reduced tax revenues and made it more difficult for HMRC to take enforcement action. Now that the initial impact of the pandemic has eased, normal tax compliance levels should be restored. HMRC also needs to recover money paid out through fraudulent claims made under the COVID-19 support schemes."
