HMRC Crackdown on Covid-19 Fraud
In the March 2021 Budget, Chancellor Rishi Sunak announced the creation of a new major fraud taskforce, the Taxpayer Protection Taskforce, established as part of a wide-reaching crackdown on criminals exploiting UK government support schemes. The new taskforce represents one of the all-time largest responses to a fraud risk by HMRC.
It has been reported that the government is losing around £1 billion a week due to exploitation of the furlough scheme emergency grants and loans introduced during the pandemic. Such losses have led David Clarke, Chairman of the Covid-19 Fraud Watch Task Force, to claim that the extent of the abuse of the pandemic financial aid may amount to the "biggest fraud in British history".
What do we expect the task force to do?
The Taxpayer Protection Taskforce, underpinned by over £100 million of government investment and manned by more than 1,250 HMRC officials, will be responsible for detecting and investigating those who have wrongly or fraudulently claimed taxpayer's money through the government's support schemes. The support schemes that the taskforce will target include:
- the Coronavirus Job Retention Scheme (CJRS);
- the Self Employment Income Support Scheme (SEISS); and
- the Eat Out to Help Out Scheme.
HMRC are currently conducting a risk analysis to determine which cases to investigate. This risk analysis includes considering payment data, PAYE records and reports from the public to identify potential wrongdoing. To date, HMRC has received over 21,000 reports from the public of suspected CJRS fraud.
HMRC have already began around 10,000 enquiries into suspected wrongful claims and some of these cases include criminal investigations. We expect that given the additional resources that are being made available, HMRC will open a significant number of further investigations in the course of the next 12 months.
What should businesses do?
In view of the fact that HMRC is actively investigating claims, businesses who have relied on any of the above support schemes should, as a matter of priority, carefully review their internal records and systems to ensure they were eligible for the payments they have received and also to identify any discrepancies in the claims they have made.
Where discrepancies are detected, a more detailed and forensic examination may be required along with consideration as to whether to make a disclosure to HMRC. Those that do come forward before prompted by HMRC, will be able to minimise the risk of a criminal investigation or significant civil penalties.
Businesses should also ensure any paperwork for claims made are up to date and they should also collate any documentation which details the business rationale underpinning why certain claims were made. Businesses should ensure not only that they have acted in accordance with the law, but also that they can evidence this with a clear audit trail.
Now is the time for businesses to take stock, consider their position, and where necessary, take action.
How can RPC help?
We are well placed to help businesses comply with their obligations and have extensive experience of both contentious tax and regulatory matters. This is a specialist area demanding a high degree of expertise which is not readily available in most professional practices. Our team includes former senior members of HMRC Solicitor's Office. We understand how HMRC operates, what strategies it may use in enquiries and during criminal investigations. We can assist in preventing an issue escalating - prevention is better than cure!