Understanding the HMRC furlough scheme and the rules regarding furlough pay can be confusing. St Pauls Chambers are here to offer furlough legal advice and answer these commonly asked questions:
- what is furlough fraud?;
- how to report furlough fraud?;
- and what to do if your employer is abusing furlough?
What is the furlough scheme?
In response to the COVID-19 pandemic, HMRC imposed the furlough scheme on 20th March 2020, in the interest of assisting businesses with financial support against the impact of Coronavirus. HMRC reports that by the end of August 2020, 9.6 million employees were registered on the furlough scheme.
The Government funded furlough scheme, otherwise known as Coronavirus Job Retention Scheme (CJRS), initially paid 80% of furloughed workers wages up to £2500 per month per employee to retain employees. The Government contribution has since altered to a 70% grant in September 2020 and a 60% grant in October 2020.
The furlough scheme is coming to an end on 31st October 2020; hence it’s important to keep updated on the HMRC guide to Changes to the Coronavirus Job Retention Scheme.
What is furlough fraud?
Furlough fraud occurs when a business intentionally or unintentionally overclaims from the HMRC furlough scheme. As the scheme came into place quickly, furlough fraud could be the result of the employer misunderstanding the CJRS guidelines. However, some individuals intentionally took advantage of the furlough scheme for financial gain, with the National Audit Office reporting that £3 billion of the CJRS funds have been fraudulently claimed.
On 22nd July 2020, the Finance Act 2020 received the Royal Assent meaning that by law, businesses had 90 days from the day of receiving the grant to report any wrongful or overpaid grants from the CJRS.
Businesses registered with the furlough scheme had the instruction to receive the government grant and their furloughed employees were not permitted to undertake any work or work-related activities.
For instance, an example of businesses breaking this guideline would be asking employees to open and check their emails while receiving furlough pay. Any process which contributes to the business is not allowed while on furlough pay, such as asking an employee to attend business meetings either in person or virtually.
As a furloughed employee, it’s legal for you to request and take annual leave and it’s also legal for your employer to ask you to take annual leave, as long as they have given you double the notice period of the requested holiday. Taking annual leave while on furlough doesn’t impact your furlough pay. However, it would be fraudulent for an employer to state that while on annual leave, you don’t receive annual leave pay and keep this sum for themselves. Moreover, if you haven’t been able to take annual leave due to the COVID-19 pandemic, government legislation means you can now take this owed annual leave forward for the next two years.
How to report furlough fraud?
Up until mid-August, the furlough scheme had cost the UK Government £35.4 billion to secure jobs in a time of uncertainty. This substantial amount comes from taxpayers’ money; hence HMRC takes furlough fraud very seriously. It’s reported that £3.5billion has been fraudulently overclaimed either by mistake or intentionally from the furlough scheme. This considerable overclaimed amount could have been utilised on other valuable means to help the economy.
The implications for businesses include a 100% repayment of any fraudulent claims or overpayments not reported, alongside a penalty charge of up to 100%. Alternative implications of furlough fraud include being arrested, with the first arrest in relation to furlough fraud occurring in early July, and more recent arrests include suspected fraudulent claims of up to £70k.
For furlough legal advice?
- are an employee who has been abused by the furlough system and believe you have been unfairly treated or dismissed
- are a business under investigation by HMRC regarding furlough fraud
- have been accused as an employer abusing furlough,
Look no further than St Pauls Chambers for furlough legal advice. St Pauls Chambers has a team of knowledgeable and experienced fraud law barristers who are keen to support you during any stage of your case.
In the meantime, you may find these HMRC guides of great value: