Number of arrests for Covid fraud made by HMRC surges almost 200%
HMRC is facing increasing pressure to identify and prosecute fraudsters
People who know they have wrongfully applied for Covid support are running out of time to contact HMRC
HMRC is accelerating its investigations into Covid-related fraud having been given substantial extra funds to pursue fraudsters in the March 2021 Budget, says RPC.
HMRC was given an extra £100m to form a Taxpayer Protection Taskforce and hire 1,265 staff to combat fraud carried out in relation to the various HMRC-administered Government financial support pandemic schemes, through to 2023.
The Government provided almost £100bn** in support to individuals and businesses during the pandemic to prevent job losses and insolvencies. However, the furlough scheme, SEISS and Eat Out to Help Out attracted large numbers of fraudulent applications. HMRC’s estimate for error and fraud on Covid support schemes is around £4.5bn***.
Adam Craggs, Partner and Head of the Tax, Financial Crime and Regulatory team at RPC, says: “HMRC is now deploying huge amounts of resources to track down individuals and businesses who committed Covid-related fraud.
“HMRC already had a large number of officers who are experienced in investigations and compliance work, but the extra funds provided by the Government to crack down on Covid fraud has really helped them ramp up their efforts.
“The public is understandably upset that many fraudsters appear to have received large sums of Government money which they were not entitled to. HMRC has responded to that strong public sentiment by prioritising work in this area.”
By the end of March 2022, HMRC had opened 41,000 separate compliance cases relating to Covid fraud. By the end of 2022-23, HMRC expects to recover up to £1.5bn in fraudulent and incorrect payments.
Adam Craggs says that those who suspect they may have committed fraud during the pandemic, or made innocent, but erroneous furlough claims, should contact HMRC if they want to achieve a more sympathetic hearing.
If businesses that have overclaimed through the Covid support schemes are subsequently investigated by HMRC, they will in all likelihood face much more severe penalties than those businesses and individuals that have contacted HMRC.
Adam Craggs adds: “Don’t make the mistake of assuming that if HMRC have not contacted you already that they won’t in the future. When investigating suspected fraud, HMRC often takes many months carrying out its investigations before contacting those suspected of perpetrating the fraud.”
HMRC made a total of 309 arrests last year compared to 303 in 2020-21, with the balance of arrests focusing on tax evasion.
*Year to 31 March 2022
**HM Treasury, HMRC (Furlough Scheme, Eat Out to Help Out, SEISS)
***HMRC, 2022