HMRC has received almost 14,000 whistleblower reports against employers in relation to furlough scheme fraud. With penalties and prosecution facing fraudulent employers, what classifies as furlough fraud and what happens if an employer made an accidental error? Laura Parr, Employment Tax Director at PKF Smith Cooper, explains.

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Furlough fraud cost HMRC an estimated £5.5 billion during the Coronavirus Job Retention Scheme (CJRS), which was active from April 2020 and September 2022.

Fraud was harder to detect at the time due to the urgency surrounding the scheme’s implementation and the vast number of claims that were made, but HMRC has since committed additional resource to their fraud investigation teams.

Latest measures to tackle furlough fraud

  • HMRC has recruited 2,000 new employees to support fraud investigations, specifically regarding furlough and other COVID support schemes
  • HMRC has published a list of employers that claimed furlough online to encourage employees to whistleblow via a digital reporting service

What is furlough fraud?

An employer may have committed furlough fraud in a number of ways. If an employer deliberately claimed back wages through the CJRS for an employee that was still carrying out work for them, they committed furlough fraud. Other examples include claiming money for fictitious employees, and misrepresenting or incorrectly calculating the number of hours that an employee has worked in order to claim more money.

What happens if you made an accidental error when claiming furlough?

Due to changing rules throughout the furlough scheme, HMRC acknowledges that some employers may have made accidental errors with claims. However, even where errors were accidental, HMRC is still aggressively pursuing the repayment of overclaims.

If employees were underpaid furlough, either due to miscalculation of working hours or furlough reference pay, employers are required to reimburse employees for the full amount they are owed.

If payments are not made, HMRC will seek repayment of the specific furlough claim on the basis that the payment was not paid in line with the CJRS legislation. Penalties are being sought in every instance.

What to do if you suspect that you have claimed furlough incorrectly

If you are concerned that you may have claimed furlough incorrectly, contact us ASAP. Our employment tax experts can support you with mitigation advice and discuss your options.