Businesses warned to review Covid support claims as government aims to recoup £1bn in funds

Experts urge firms to reflect on whether payments need to be returned as new HMRC task force is announced

The government has announced plans to recover up to £1bn of Covid support wrongly claimed by businesses through a specialised anti-fraud taskforce, as experts urge employers unsure about their furlough claims to review them as soon as possible.

Official figures have estimated £5.8bn has been lost to fraud through its schemes to support businesses during the pandemic, including the Coronavirus Jobs Retention Scheme, Self-Employment Income Support Scheme and Eat Out to Help Out.

The tax authority said £500m of wrongly claimed support has already been recovered, and another £350m has been returned without the intervention of HMRC. Separately, £650m in grants that were rightfully claimed have been returned because the companies no longer needed the support.

HMRC has now said it plans to reclaim between £800m and £1bn of Covid support money lost to fraud by 2023 through a new Taxpayer Protection Taskforce, which consists of 1,265 HMRC employees and into which the government has invested £100m.

Kate Shoesmith, deputy CEO of the Recruitment and Employment Confederation (REC), said the majority of businesses tried hard to comply with both the spirit and the intention of the furlough scheme, and suggested that these employers need not worry about the government clawing back money.

But, she warned, where fraud had taken place, the government was right to recoup the money and not allow bad faith actors to taint the hard work of other firms. This was “especially important given all the extra costs businesses will face this year,” she said.

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When asked what firms can be doing now to mitigate risk, the majority of experts People Management spoke to said businesses should now be reflecting on their claims and whether they need to repay them.

Jemma Sherwood-Roberts, a partner at Constantine Law, said this would largely be a judgement call on the part of employers. If firms were confident their claims were legitimate, she advised: “Document that decision, noting how the claim was linked to the purpose of the scheme.”

Where claims turn out to be incorrect, rather than “brazen it out”, Sherwood-Roberts said the better option may be to self-report and return funds, otherwise firms may “risk the new task force knocking on the door”.

Lee McIntyre-Hamilton, tax partner at Keystone Law, cautioned that assuming furlough claims were correct was a risky approach. While revisiting claims may be an “unwelcome and perhaps painful exercise”, doing so now could help prevent unexpected issues arising in future. 

He added that firms should not be liable for a penalty if they return any overpayments to HMRC within 12 months from the end of their accounting period in which the claim in question was made, provided that they did not know the claim was incorrect at the time it was made or when they stopped being entitled to claim.

“Voluntarily identifying and disclosing such claims to HMRC is likely to mean a significantly reduced penalty when compared to leaving it until the position is discovered by HMRC,” he said.

Not managing a furlough claim properly could also impact future business. Sarah Wallace, another partner at Constantine Law, warned that any furlough claims made in breach of the rules could come under scrutiny if furloughed staff were made redundant and subsequently made whistleblower claims.