Up to £3.5 billion in furlough payments fraudulent, HMRC finds

HMRC has revealed that almost £3.5 billion in Coronavirus Job Retention Scheme (CJRS) payments have been claimed fraudulently or paid out in error.

HMRC told the Public Accounts Committee (PAC) that it estimates that between 5% and 10% of CJRS funds have been provided in error. According to the PAC, in 2019 £30 billion in tax was lost as a result of taxpayer error and fraud.

HMRC said it intends to target individuals who made fraudulent CJRS claims, rather than penalise employers who made legitimate mistakes in compiling their claims.

Commenting on the issue, Jim Harra, Chief Executive of HMRC, said: ‘We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%. That will range from deliberate fraud through to error.

‘Although we will expect employers to check their claims and repay any excess amount, what we will be focusing on is tackling abuse and fraud.’

Harra told the PAC: ‘We are not going to set out to try and fine employers who have made legitimate mistakes in compiling their claims because this was obviously something new that everyone had to get to grips with in a very difficult time.’

Instead, HMRC will be writing to employers to give them the opportunity to correct mistaken claims and repay excess amounts.

Harra said HMRC’s hotline for reporting furlough fraud had received 8,000 calls so far. In total the tax authority was investigating 27,000 ‘high-risk’ claims.

Furlough is now winding down and is expected to end for good next month. However, businesses that bring staff back from furlough will receive another £1,000 if the employee is still in work by the end of January.