The Public Accounts Committee’s updated Covid 19 cost tracker - published last week - has revealed that the amount of fraud and error in the government’s furlough scheme is far greater than expected.
It was found that an estimated 8.7 per cent of money distributed by the scheme - equivalent to £5.3bn - has been lost to fraud and error.
HMRC announced last month that an estimated £5.8bn had been lost to fraud across all its schemes supporting businesses during the pandemic. The schemes included the Coronavirus Job Retention Scheme; Self-Employment Income Support Scheme and Eat Out to Help Out.
However, a government spokesperson stated that no payments claimed fraudulently have been written off - and that action is being taken to recover overpayments.
The spokesperson said:
“HMRC’s Taxpayer Protection Taskforce is expected to recover up to £1bn from fraudulent or incorrect payments. There are lessons to learn but we reject many of the statements made by the PAC.”
The taskforce, which is receiving £100m of funding from the government, will consist of 1,265 HMRC employees and their aim is to recoup £1bn of furlough support which has been wrongly claimed by businesses.
Kate Palmer - HR Advice and Consultancy Director at Peninsula - blamed the changing furlough rules and requirements for the confusion caused to employers.
She said that it would be “beneficial for employers to proactively check that they have stored the necessary information and seek to compile this where data is missing”.
She added that employers could complete their own compliance check of their partaking in the furlough scheme and report any errors in their claims to HMRC - explaining:
“While some may be concerned to highlight a mistake, often this will avoid increased penalties if HMRC were to identify this first.”
Alan Lewis - Partner at Constantine Law - also stated that businesses should review how they have made claims under the scheme.
He said:
“If mistakes have been made, get professional accountancy and legal advice and be prepared to make provision for payment of additional tax liabilities.”
He advised employers that they should keep all relevant records for six years and consult HMRC guidelines quickly - warning that if there has been a fraud, directors of a limited company can be held personally liable.
