This is a thought leadership article from PrimeGlobal member firm Carpenter Box (Worthing, UK.) on HMRC To Crackdown On False Or Mistaken COVID-19 Claims.
HMRC are looking to recover over £1bn of fraudulent or mistakenly claimed money related to the COVID-19 support schemes. These enquiries include fraudulent claims and abuse of the pandemic support schemes and furlough money from claims containing errors.
Chief executive at HMRC, Jim Harra predicted that the tax authority looks set to recover the money over the next two years. At a Public Accounts Committee in April about fraud and error, Harra stated HMRC had 60,000 one-to-many and 10,000 one-to-one fraudulent enquiries open. These are also related to the COVID-19 schemes. Harra said that they expect to open 20,000 more one-to-one enquiries.
HMRC will carry out a random enquiry programme into claims made through schemes set up during the pandemic. These include the Coronavirus Job Support Scheme, the Self-Employed Income Support Scheme, and the Eat Out to Help Out Scheme from last Summer. This will be in order to gain a valid measure of the level of fraud across the schemes. The results of these enquiries is expected to be published towards the end of the year.
As announced in the Spring Budget, HMRC received £100m to finance the HMRC COVID-19 fraud taskforce. This was set up specifically to investigate fraudulent claims under multiple COVID-19 support schemes. The £100m allocated is to be spent entirely on COVID-19 fraud enquiries.
Harra said last September that the amount of fraudulent or mistaken furlough claims could be as high as £3.5bn. This is on the assumption that between 5% and 10% of claims were being wrongfully submitted. To date, only five people have been arrested for furlough fraud.
“The Coronavirus Job Retention Scheme has provided a lifeline to millions of people across the UK. Fraudulent claims are unacceptable. It is taxpayers’ money and fraud limits our ability to support people and deprives public services of essential funding.
At the Budget, the Chancellor committed £100m to HMRC to tackle the minority who deliberately claim help scheme money they’re not entitled to.
We’d ask anyone concerned that an employer might be abusing the scheme, or anyone with information about suspected fraud, to please contact us online. All information is assessed, and the most appropriate course of action taken.” HMRC spokesperson
The UK government has spent £340bn on the support schemes introduced at the beginning of the pandemic. This is estimated at £6,700 per household and £54bn of this was spent on the furlough programme.
This year’s Spring Budget included several mentions of increased efforts to crack down on avoidance, evasion and non-compliance. The Government is to invest £180 million in additional resources and new technology for HMRC in 2021-22. This is intended to bring in £1.6 billion of additional tax revenue between now and 2025/26.
The benefits of this are to include ‘enabling taxpayers to more easily access tax services and make the collection of tax and payments to taxpayers easier’. The overall effect however, is clearly intended to raise revenue.
Unfortunately this type of targeted investigation by HMRC is not uncommon. Every year thousands of enquiries are undertaken into personal and business tax affairs and many are selected completely at random. As a result, anyone can be picked for investigation, even if you have done nothing wrong. This in turn can take many months and cost thousands of pounds in professional fees to resolve.
We offer our clients a Tax Investigation Service, which acts in effect as an insurance policy against the time and costs incurred by us responding to HMRC enquiries or investigations (including COVID-19 support claims) where we deal with the tax compliance. Read our Fact Sheet below for further information on the service:
Carpenter Box is an award-winning sector focused firm of Chartered Accountants, Tax and Business Advisers based in South East England, with a headcount of nearly 200. To best serve clients, the firm is organised into specialist business groups, offering a comprehensive range of services to businesses and private clients. By building strong relationships, the firm's specialist teams advise clients on growing their business in a profitable, sustainable and tax efficient way. At Carpenter Box, the team want to understand what clients want to achieve and work closely with clients to help them get there. They offer practical solutions which are right for businesses, business owners and individuals and the wider family. With a relationship led service, the firm looks to build trust to understand the opportunities and challenges faced by businesses.Learn more