Businesses that abuse the CJRS scheme may be charged with criminal offences

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HMRC has already prepared for potential abuse of the GBP60-billion Coronavirus Job Retention Scheme announced by the Chancellor of the Exchequer last month to protect employees’ livelihoods during the coronavirus pandemic.

The scheme allows businesses to apply for a grant of 80 per cent of each employee’s usual wages up to a cap of GBP2,500 per calendar month, with the costs of employer National Insurance and pension contributions being covered by the government. Further details are in our blog here https://www.src-time.co.uk/blog/coronavirus-job-retention-scheme-made-easy-employers 

The initial three-month period began on 1 March 2020. It is available only where the employee cannot work due to the closures imposed by the Coronavirus Act 2020 and the Health Protection (Coronavirus, Restrictions) (England) Regulations 2020. 

HMRC has said any fraudulent claims made under the scheme – for example, where employees have continued to work while furloughed – are likely to result in criminal convictions. Its chief executive Jim Harra, told Parliament last week that he expected it to be targeted by fraudsters and added that HMRC had put in place a number of measures to minimise fraud, which included:

  • the requirement for an employer to have already been authenticated by HMRC
  • a four- to six-day payment processing period to allow background checks
  • checks on employers after a payout has been made to verify a claim was real.

When HMRC discovers abuse of the abuse is detected, it will disallow payments, seek recovery of any overpayment, and consider criminal action against employers.

Mr Harra reiterated that employees who had been furloughed must not carry out any work for their organisation, and urged those who had been asked to continue working while on furlough to report their employer. HMRC have created a page on which furloughed employees can obtain additional information https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme A special CJRS Fraud Hotline will be established soon.

HMRC has a number of offences under which it could seek to prosecute a company director personally in respect of a CJRS fraud:

  • Conspiracy to Cheat the Revenue which is a common law offence with a maximum penalty of life imprisonment
  • Fraud by false representation under the Fraud Act 2006 with a maximum penalty of 10 years imprisonment
  • Failing to prevent tax evasion under the Criminal Finances Act 2017 with a maximum penalty of an unlimited fine.  

For HMRC the last would be the easiest to secure a conviction under as it is a strict liability offence and intent on the company’s part does not have to be proved to obtain a conviction. It is necessary to prove only that there has been criminal tax evasion that was ‘facilitated’ by a person or entity who performed services for or on behalf of the business.

It is important to complete all CJRS claims completely and accurately to avoid a potentially expensive and time consuming criminal investigation.

SRC-Time are one of the South East’s leading accountancy firms in advising businesses in all aspects of their accounting and tax affairs and we are able to assist in any issue raised above.

Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at info@src-time.co.uk  or speak with an account manager to get any process started.

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