New analyses has found that HMRC has so far received almost 14,000 reports of furlough fraud from whistleblowers, most of whom are employees of the businesses being reported
Furlough Fraud
A report compiled by Pinsent Masons has found that HMRC have received 13,775 reports of furlough fraud from whistleblowers, including via its online report form. Many of these reports came from employees of the businesses being reported.
Back in November 2021, HMRC reported that furlough fraud was estimated to have amounted to £5.28bn for the 2020/21 financial year, of the £60.7bn paid out under the Coronavirus Job Retention Scheme (CJRS). On that basis, furlough fraud constituted 8.7% of all monies paid out under the CJRS scheme. Further monies were lost to furlough fraud on the other Covid-19 pandemic support schemes as well, including the Self-Employment Income Support Scheme (SEISS) and the Eat Out to Help Out scheme. The total amount of furlough fraud was estimated to have been £5.8 billion.
These figures have now been updated by HMRC, who now estimate that total fraud could have been up to £6.4 billion, but was "most likely" to have been about £4.5 billion.
In its report, HMRC state: "Previous provisional estimates for the total value of error and fraud in 2020 to 2021.....stood at between £4.5 billion and £8.0 billion, with a most likely estimate of £5.8 billion.....Across the full two-year lifecycle of the three schemes (covering 2020 to 2021 and 2021 to 2022), the total value of error and fraud is now estimated to be between £3.2 billion and £6.4 billion, with a most likely estimate of £4.5 billion...This is less than the previously published range for 2020 to 2021 alone."
The report published by Pinsent Masons, who acquired the information via a freedom of information request, found that:-
- HMRC have so far received 13,775 reports of furlough fraud, many via its HMRC’s online digital reporting service, with many of the whistleblowers being employees of the businesses suspected of fraud
- 268 directors have been banned from running companies
- A fraudster based in india set up 4 fake companies to claim £27.4 million in relation to 2700 fictitious employees over 14 months. £26.5 million of that money has since been recovered through a forfeiture order
Only A Small Amount Of The Money Lost Will Be Recovered
Whilst the estimate of fraud has been revised down to £4.5 billion by HMRC, HMRC also estimate that only around a third of the money lost may be recovered.
In a statement released on the 12th January 2022, HMRC said: "Work to recover fraud and error began almost as soon as the schemes launched. We recovered £500 million of overpayments in 2020 to 2021. The government then invested £100 million in a Taxpayer Protection Taskforce of 1,265 HMRC staff to combat fraud in the schemes. We expect the taskforce to recover £800 million to £1 billion between 2021 and 2023."
Nevertheless, if the HMRC recover an addition £1 billion by 2023 to add the £500 million already recovered, that still means that £3 billion will have been lost to furlough fraud in total. Hence, just 33.33% of the monies would have been recovered.
Qualified Sign Off
The National Audit Office (NAO) have confirmed that HMRC's accounts have only been given a qualified sign off due to the uncertainty surrounding the level of fraud and error pertaining to the coronavirus support schemes.
The head of the NAO, Gareth Davies stated that the estimates provided by HMRC continued to be "subject to considerable uncertainty”.
Davies added: "The key sources of uncertainty that require significant judgement to be exercised, include: reliance on internal and external survey data where there is no direct evidence at the claim level; the availability of more current random enquiry and self-assessment return data requiring the results of earlier analysis to be extrapolated across the remainder of the schemes; and weaknesses in certain aspects of the random enquiry programme that did not find evidence of organised crime or non-payment of furlough to employees."
