The Coronavirus Job Retention Scheme (‘CJRS’) and other support measures have, and continues to, provide vital support to UK businesses and their employees. However, it has been suggested that some claims under CJRS (and other measures) may have been made fraudulently and with the expected level of insolvencies increasing in 2021, many insolvency professionals may come across new types of fraudulent activity.
HMRC furlough fraud team
HMRC have set up a dedicated team to identify and recover funds where the CJRS and other support payments such as the Self-employed Income Support Scheme and the Eat out to Help Out scheme, were made when they weren’t properly due.
HMRC have the power, where such claims are identified, to apply a tax charge equal to 100% of the claim and where such claims have been made deliberately. HMRC can also impose a penalty of up to 100% of the tax charge.
Any queries should be sent to cppcinsolvency@hmrc.gov.uk
Key role of office holders
Where HMRC are aware that an office holder has been appointed in a case in which they are undertaking further investigation work they will automatically send out details of any claims that have been identified that may be erroneous, to assist the office holder with any investigations. Furthermore, HMRC have set up a referral route with the Insolvency Service with regards to director disqualification.
Office holders should also ensure they make the Insolvency Service aware where any such claims have been identified as part of the director reporting process. For example, if ‘furlough monies’ were inappropriately used and not paid to employees but used to reduce a director’s loan account, then this should be submitted as a single report online via the secure portal (The Director Conduct Reporting Service), within three months of the relevant date.
In instances where CJRS monies are concerned, then any known inappropriate use should also be highlighted to HMRC. Further guidance can be found at the following link:
https://www.gov.uk/government/organisations/hm-revenue-customs/contact/report-fraud-to-hmrc
Additionally, a specific connection has been set up for reporting fraudulent claims and use of CJRS fund can be found at the following link:
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
It should be noted that CJRS claims are going to be made public to try to limit/reduce fraud.
Director loan accounts
Any director’s loans should also be highlighted to the Redundancy Payments Service should the director make a claim for statutory payments from the National Insurance Fund – the amount owing to the Director Loan Account will be offset against any statutory entitlements as per Rules 14.24 and 14.25 of Insolvency Rules 2016.
Return of CJRS monies
In a normal trading situation if a company is unable to transfer the funds to the respective employees for some reason, the CJRS monies must be returned. HMRC recognises that the situation when there is a formal insolvency is different and the outcome will depend upon the facts in the particular case.
HMRC has a dedicated contact for queries on CJRS which can be found at the following link:
EMPLOYERS WHO HAVE CLAIMED THROUGH THE CORONAVIRUS JOB RETENTION SCHEME
Monthly data on claims made by employers through the Coronavirus Job Retention Scheme is available here.
It may be worth adding to members adding to pre-appointment checks.
From February the data will provide an indication of the value of the claim within a banded range and company number.