Furlough fraud crackdown gets under way

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    James Martini

    James Martini UKBF Ace Free Member

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    While the Government continues to splash the cash to try and limit the economic damage sustained during lockdown, ministers are stepping up their attempts to crack down on coronavirus-related fraud. 

    HMRC’s spotlight predominantly falls on cases of furlough fraud. Earlier this month, a man was arrested in the West Midlands on suspicion of defrauding the job retention scheme to the tune of £495,000. 

    The scheme was brought in to minimise unemployment due to the coronavirus crisis, with the Government stumping up 80% of staff salaries up to £2,500 a month. But once an employee has been furloughed, they cannot do any work that would help their employer make money.

    However, research from Crossland Employment Solicitors found that more than a third of furloughed employees have been asked to carry out work by their bosses. If that is an accurate yardstick, as many as 400,000 of the 1.2 million employers to have used the furlough scheme since its inception in March could be in direct contravention of the rules.

    What counts as furlough fraud?

    Many businesses are knowingly dodging the law for their own benefit. Others might be unwittingly breaking the law, however, which could have grave consequences.

    Forcing employees to work while on furlough until they received a reduced pay cheque is obviously breaking the rules, as is telling staff the scheme is only paying a certain amount while the employer pockets the rest.

    Employers who furlough workers only to ask them to have a weekly Zoom meeting, whether for team spirit or other reasons, are an example of people innocently committing furlough fraud as staff are carrying out work duties by having a team meeting. 

    Self-reporting amnesty & repercussions

    Employers have the option to self-report any misuse of the furlough scheme within 90 days, but they run the risk of having to pay back money they have received. 

    For some businesses, such as pubs or hairdressers, the difference between coming clean and keeping schtum might literally be insolvency, so it’s not as black and white as it sounds. 

    HMRC has previously stated it will adopt a lenient approach with genuine mistakes surrounding furlough fraud, and that will extend to firms who self-report to be on the safe side. 

    If the Revenue does decide to investigate a business for suspected furlough fraud, it will probably have had a good dig behind the scenes and that will mean the punishment will be anything but lenient.  

    Bigger firms ‘fess up

    Some larger employers who used the scheme have repaid their slice of the £29 billion paid out by the Government after remaining profitable during the worst months of the crisis. 

    Press Acquisitions Ltd, which owns both The Spectator and Telegraph Media Group, paid back furlough money received through the job retention scheme. A large independent firm of solicitors in Bristol is considering following suit after coming through the crisis strongly. 

    Naturally, those larger firms had contingency plans in place, while adequate cashflow to sustain any disruption caused by the lockdown also makes it far easier to repay cash to the public purse. For smaller employers or those in the hardest-hit sectors, the choice is far more opaque. 

    Snitches & false accusations

    People who suspect their employers are abusing the furlough scheme are being invited to report these instances anonymously and in confidence. 

    HMRC had received more than 3,000 reports of furlough fraud by the end of June 2020, suggesting that arrest earlier this month will probably prove the first of many more to come. 

    For every suspected case of furlough fraud reported, however, comes the risk of being falsely accused. Innocent victims of an investigation should seek legal advice and direct all communications through a professional. 

    Six months to a year down the line, HMRC will have the full picture of how much money has been paid out through the furlough scheme and the crackdown will be in full swing. If they have clear cases of furlough fraud then it is going to be straightforward to get it back.

  2. Recruitment&HR

    Recruitment&HR UKBF Contributor Full Member

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    "Employers who furlough workers only to ask them to have a weekly Zoom meeting, [...] for team spirit [...], are an example of people innocently committing furlough fraud as staff are carrying out work duties by having a team meeting. "

    That is absolutely and categorically wrong.

    Employers are encouraged to keep in touch and the rules are that employees must not undertake duties which
    • make money for their employer or any organisation linked or associated with it
    • provide services for their employer or any organisation linked or associated with with it.
    A "team spirit" Zoom call does not meet those definitions in the slightest.

    ACAS and CIPD recommend to keep in touch with furloughed staff just as you would with staff on extended sick leave or maternity leave.

    The government agrees and highlights that the employer's duty of care for their employees' wellbeing continues to apply.
    Posted: Jul 24, 2020 By: Recruitment&HR Member since: May 30, 2019
    Stephen Maginn likes this.
  3. Ray Newman

    Ray Newman UKBF Regular Free Member

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    As I understand it, the distinction is between social and professional. I suppose 'team spirit' might be up for debate but 'weekly team meeting' suggests work to me, not social.

    If I'd been furloughed and joined a team social but the boss took the opportunity, while I was there, to ask, "By the way -- that client you were talking to in March...?" it suddenly becomes work, doesn't it?

    I guess whether it's optional or not is also a key indicator. If you can't say no, don't fancy it this week, then it's work.
    Posted: Jul 24, 2020 By: Ray Newman Member since: Dec 13, 2018
  4. Recruitment&HR

    Recruitment&HR UKBF Contributor Full Member

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    Even if it's scheduled and not optional, it is fine as long as it is social and does not create revenue for the business and you do not create tangible work by performing services.

    "Was client X always so difficult to deal with? They've been a right pain!" is fine.

    "Can you please find that e-mail from client X from back in January and forward it to me so I can see if they might need more stock?" is not.

    Of course a much bigger problem here is - there is no record of what is said during a Zoom call. Bad employers unfortunately have become quite clever... suspending e-mail accounts, not using phone calls but WhatsApp calls or Telegram messaging and that makes it very difficult to even find evidence of real fraud.
    Posted: Jul 24, 2020 By: Recruitment&HR Member since: May 30, 2019