BLOG / First major arrest for alleged fraud under the Job Retention Scheme
There have been reports of the first major arrest arising out of suspected fraud under the Job Retention Scheme.
A 57-year-old man has been arrested in Solihull, in the West Midlands, on suspicion of cheating the public revenue, fraud by false representation, VAT evasion and money laundering as part of a suspected £495,000 Job Retention Scheme fraud. Eight other men were arrested in relation to a separate multi-million pound tax fraud and alleged money laundering offences. It has been reported that more than 100 officers from HMRC were deployed to 11 different locations.
The man has been released under investigation.
In a press release, HMRC emphasised that more than £27bn had been claimed through the scheme and that the vast majority of employers presenting claims had done so lawfully.
HMRC has set up an online tool to report fraud under the furlough scheme. No personal details need to be provided, and any information will be treated confidentially. HMRC has disclosed that it has already received thousands of reports of fraudulent use of the furlough scheme. Separately, organisations advising potential whistle-blowers have reported significant numbers of workers getting in touch to raise concerns of fraud.
Under the Job Retention Scheme, no furloughed employee may carry out paid or unpaid work on behalf of an employer. Furloughed employees may be asked by their employer to undertake certain forms of training (but not if the training provides financial benefit or services to the employer). An employer who claims under the Job Retention Scheme while having furloughed employees undertake work for them could be committing a criminal offence.
Under the Flexible Furlough Scheme (which began on 1 July 2020), employers may now agree with previously furloughed employees that they will undertake work for any amount of time and under any shift pattern. The employer must keep records of the hours actually worked by the employee. Employees will be paid their full salary for this work – with their wages, tax and national insurance paid for by the employer. Employers can later claim the shortfall between the employee’s hours actually worked and their normal hours, up to the 80% furlough ceiling.
It remains to be seen how many more reports of fraud will be made. It is clear that HMRC has now committed significant resources to investigating fraudulent claims made under the Job Retention Scheme.