CJRS case: Business owner arrested over £495,000 furlough fraud claim
Following the execution of a search warrant in the West Midlands, HMRC said officers detained a 57-year-old man, suspected of defrauding the CJRS to the tune of £495,000.
Funds held in a bank account relating to the man’s business were frozen, while computers and other digital devices found inside the property, in Solihull, were seized, HMRC said.
Tax experts say that furlough wages being taken from the government and then not paid, either fully or in part, is among the first of three big checks which HMRC would make.
Whether a claimant company’s employees, including directors, were working during furlough, or were coerced into working while on furlough, are the other two.
These three are scrutinised ahead of a “whole raft” of compliance issues which Peter Disney, a chartered accountant, has warned HMRC will likely look at in a CJRS enquiry.
“[Furlough scheme] enquiries are now starting to pick up,” said Mr Disney, reflecting online just before the Solihull businessman was arrested on Wednesday.
'All the email log-ins'
The accountant added: “We have heard of a HMRC CJRS enquiry visit to a business where they have requested details of all the email log-in records.”
In the Solihull case, the man was arrested on suspicion of cheating the public revenue, but also for a suspected multi-million-pound tax fraud and alleged money laundering. Eight other men were arrested in connection with this adjoining case.
But on his furlough fraud charge, the businessman could be made personally liable for his company’s tax and penalty if HMRC can pass two tests, implies analysis by HMRC dispute advisory Tax Resolute.
'Knew the company was not entitled'
First, that he was “responsible for the management of the company at the time,” says the advisory’s Jesminara Rahman, and second, that he “knew the company was not entitled” to the CJRS payment.
“HMRC can impose a deliberate 100% tax band and 100% penalty, where there is deliberate intent to overclaim or misuse of the CJRS grants through the proposed new powers,” added Ms Rahman, the advisory’s director.
“[And even] if the company is liquidated, HMRC will be able to pursue the individual, normally an officer of the company, personally, for the tax as well as the penalty owed on CJRS payment via personal liability notices.”
'HMRC are coming for you'
Disclosing the first ever CJRS-related arrest to the media, the Revenue said the government had built “four lines of defence” against tax abuse into the scheme.
The four defences were listed as the March 19th start date (to help ‘prevent the use of fake employees’); HMRC’s authenticating of employers; 72-hour assessment of claims and fourthly, “reasonable interventions with customers after money has been paid.”
Robert Sharp, boss of Orca Pay Group, hinted that the Revenue’s militant language about the CJRS indicates that it’s now on the offensive.
“With [many tens of thousands of] calls to the fraud line”, he said, “employers and businesses who have fraudulently been claiming furlough payments, HMRC are coming for you. Beware.”