Lovely people, the HMRC – completely above criticism in all respects, I have always thought. Just wanted to put that out there in a way obviously wholly unrelated to this week’s news that the Revenue has launched over 12,800 “probes” into misuses of Coronavirus support schemes. The majority of these relate to the CJRS furlough scheme, but as if to prove that there is no such thing as a free lunch even in a restaurant, over 400 of them concern alleged abuse of the eat-out-to-help-out scheme which flowered briefly last year and then withered as infection rates rebounded.
The headlines on this leave a lot unexplained. What is a “probe”, for example, and does HMRC genuinely have the spare manpower to run nearly 13,000 of them on top of its day job? It does also seem clear that these enquiries will not be the last, but are merely the most obvious so far. In addition, as the CJRS continues towards its expiry in September, further instances of error or fraud may still be turned up, especially as the government contribution starts to wind down. Claimed losses to fraud or error of over £3.5 billion represent a whopping target for the Treasury (though it has expressed the view that recovering a third of this in the next two years would still be a result), so we can assume that this represents the start of a pretty long and serious game by HMRC. Remember that it was a requirement of the CJRS that records be kept for a full five years. In relation to the resources question, the government has reportedly invested £100 million and considerable credibility into a specialist Coronavirus fraud task force which already has over 1,200 staff looking into alleged fraud and mistakes in relation to Coronavirus support measures. This is not going to be one of those political initiatives launched to lots of fanfare and headline and then quietly shelved or soft-pedalled when something newer and shinier appears.
12,800 investigations (presumably anything from a desk-review of a file to a dawn raid) is a lot to come from nowhere. Given that over 11 million employees have been put on furlough at some point by over 1 million different employers and payments out of over £64 billion have already been made, how does HMRC even know where to start?
The Financial Times reports that HMRC’s whistle-blower hotline received over 28,000 allegations of possible furlough fraud by the start of June. It is unlikely that all of these will become the subject of formal investigations, since some will inevitably be too small or petty to be worth the candle (“they once made me answer a work question on a day I was furloughed“). Others may appear vindictive, fabricated or clearly incorrect based on records already within HMRC’s possession.
However, some of those disclosures will unquestionably be genuine and will represent abuse, even if only inadvertent, of the support schemes. Before any physical visit, it seems likely in most cases that HMRC will conduct its initial investigation through the unearthing of inconsistencies between different sources of data relating to the claimant business. The FT noted, for example, that HMRC might compare trading receipts for a business against its furlough claims – is the level of trading activity consistent with the proportion of the workforce said to have been out on furlough? If it has doubts, HMRC has the power to require disclosure of employee email and telephone records, which might help it verify whether there is substance to employee allegations of having been made to work while on furlough. Were the furloughed employees’ pre-pandemic earnings actually as high as the CJRS amount claimed?, and so on.
It might be said that these are questions which HMRC could or should have posed when the initial claims were made and paid out, but both the financial and political necessity has been to make payments first and ask questions afterwards, despite the risk of leakage to error and fraud, hence the very express threats when the CJRS was launched around retrospective audit when it was all over. No employer can say it wasn’t warned.
The formal “amnesty” period for declaring CJRS errors expires 90 days from receipt of the sums in question. However, even if you missed that, it does not mean that you just have to sit there transfixed with the knowledge of some undeclared error until the sky falls in. Particularly as a smaller employer (by size of CJRS claim, not number of employees or turnover) a voluntary declaration and payment back to HMRC is likely to be gratefully received without triggering further enquiry, simply because it reduces the probability of any meaningful further recovery for the Revenue relative to the cost of pursuing it.
Therefore, if you did not do this exercise at the time, it may be worth a brief review of your CJRS position should HMRC come calling. Pick some furloughed names at random and have a look at their email traffic for the relevant period. This is particularly important where it is possible that junior managers have imposed work obligations on their subordinates while senior management or HR remained blissfully unaware. Do a sample comparison of furlough claims against past-year earnings. Consider whether any individual department is claiming results over the furlough period which it could not realistically have achieved given the number of people it said it had out. Make sure to extract your written furlough notices from your default shredding procedures, check whether CJRS claims stopped as soon as people left (or later on, from when they gave or received notice), and so on. If you are going to say that you did your best but the CJRS guidance at the time was too incomplete, vague or contradictory (no-one is likely to rule that out entirely as a proposition, even HMRC), make sure you have kept copies of the actual guidance you relied on and can show specifically where your confusion or misunderstanding arose.
You might hopefully not find anything materially amiss, but if you do, take some reasonably prompt advice about a pre-emptive voluntary disclosure and/or express reduction in the size of any CJRS claims you are still making so that you can show no intention to keep the money. It is also possible that you may find that you have underclaimed, but the pragmatic answer there is probably not to do anything about it. Quite aside from the time limits on back-claims for earlier underpayments, the suggestion that HMRC owes you money rather than the other way around is unlikely to be received in the spirit intended. Not quite that lovely.