Scam warning issued as furlough fraud rises – ‘Our entire economy is under threat’
Sunak says There are no plans to extend furlough in August
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Around £60billion of taxpayers money have been lost from the Government’s Job Retention scheme, otherwise known as furlough according to HM Revenue and Customs’ (HMRC) most recent report. HMRC acknowledged that the money had either been acquired by scam artists, professional fraudsters, organised crime gangs or awarded incorrectly. Since March 2020, the furlough scheme has paid 80 percent of the wages of up to 11.5 million workers placed on leave.
In light of this, a scam warning has been issued in light of the perceived rise in furlough-related fraud and its implications for the wider economy.
However, financial experts such as Daniel Martin, a Partner in Business Crime at JMW Solicitors believe it will be a long time till justice is carried out.
Speaking exclusively to Express.co.uk, Mr Martin explained: “As with most areas of UK law enforcement, resources are generally stretched and HMRC fraud investigations can take a long time, sometimes several years before coming to court.
“There are a vast number of complaints to contend with and it may be that many firms who are subjected to investigation find that the matter drags on for much longer than you might expect before they are informed of the outcome they face.”
According to The Times, companies which began their operations and trading during the pandemic have claimed up to £26.6million from the Government’s Job Retention scheme.
Concerns have been raised that these companies may be the prime culprits of fraudulent furlough claims, however Mr Martin is less as sure.
The furlough expert added: “There are genuine reasons why companies may have incorporated after the scheme was introduced so not all are going to be fraudulent.
“But, it is certainly a high risk marker and I would expect most, if not all, of these companies to be subject to some level of investigation by HMRC.”
Recently, HMRC has launched a task force charged with specifically investigating firms and companies who may have fraudulently claimed for furlough.
Despite this effort, critics believe the tax body’s efforts are not enough with only £16million having been invested into HMRC’s furlough fraud hunting efforts.
Mr Martin said: “The issue here is one of resources. The Government needed to get money to companies at pace in an unprecedented situation where our entire economy was under threat.
“This meant making money available with very little in terms of due diligence and they would have been aware from the outset that there was a significant risk of fraud.
“The numbers involved though are shocking; with tens of thousands of reports of fraud made and estimates upwards of £6illionof taxpayers’ money potentially fraudulently claimed.
“You would expect a more significant investment from HMRC to claw back those funds as quickly as possible.
“There have been a very low number of reported arrests to date and the counter-fraud effort currently appears lightweight and slow at present.
“There is lots more that could be done that currently isn’t and that will be a frustration to the public when the eventual post-pandemic inquest begins.”
In light of the pending rise in investigations into furlough, JRW Solicitors have issued advice on how employers should react to any scrutiny of their claims.
Suzanne Staunton, Employment Partner at JMW Solicitors, explained: “Employers should ensure that they carry out a fair process before taking any action against employees.
“The furlough scheme was notoriously unwieldy and difficult to manage. It may be that managers or employees acted, and there was a legitimate or fair reason for taking that action.
“Therefore, employers should keep an open mind, and conduct a full investigation, taking all factors into consideration before making a determination on the allegations and on the appropriate sanction, if any.
“However, if a manager was instrumental in coordinating the fraudulent furlough, then they could potentially be disciplined under their company’s disciplinary proceedings, following a fair process.
“If an employee was knowingly complicit in that deceit, they too could be disciplined under their disciplinary proceedings, following a fair process.
“The employer could potentially claw back some financial losses if the contract of employment allowed, and if the relevant clause was carefully drafted.”
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