HMRC arrests Bradford duo over £3.4million 'furlough fraud'
The ‘stick’ which tax experts warned HMRC would brandish to punish dodgy furlough claims within four years has been felt -- severely, and much more quickly for a Bradford duo.
In fact, just before Friday’s deadline for April 2021 CJRS claims, HMRC said it had arrested a man and a woman in West Yorkshire on suspicion of defrauding the scheme by £3.4million.
Indicating that the CJRS forms only part of their alleged activities, the 35-year-old man and 36-year-old woman were also arrested in relation to a suspected “multi-million-pound” tax scam.
Some £6 million held in bank accounts controlled by the duo has therefore now been frozen, HMRC added, following officers carrying out a search warrant in the Bradford area last month.
'Predictable, and justifiable'
But asked about just the alleged furlough fraud of £3.4million, one of the tax authority’s former inspectors last night sounded unsurprised, and unsympathetic.
“We advised….that HMRC will be bearing down on fraudulent furlough activity in April last year. It was predictable and justifiable,” said Jesminara Rahman, now a director at Tax Resolute.
“Justifiable because information and facts may not be reconciled therefore HMRC will look into it. Justifiable…[too] if fraud has taken place during the covid-19 pandemic.”
'Process now, check later'
As to the time lag between taxpayers claiming under the Coronavirus Job Retention Scheme and HMRC probing, Ms Rahman hinted it was the nature of the beast HMRC was up against.
“Their methodology has always been ‘process now and check later’ because of the huge quantity of work that has to be managed.
“There is no other practical way to deal with the high numbers [of taxpayers seeking support during the pandemic], and this is certainly true of the furlough claims processed.”
'CJRS grants set to taper off'
The arrest of the duo (each was arrested on suspicion of cheating the public revenue, VAT evasion and money laundering), follows Friday’s closing of CJRS claims for April 2021.
Currently, employers including limited companies can still claim 80% of a furloughed employee’s usual wages for the hours not worked, up to a maximum of £2,500 per month.
But from July, CJRS grants will "taper off" and employers will only be able to claim 70% of the wages, up to a cap of £2,187.50, advises Chartergates.
In August and September, the claimable proportion will fall to 60% of wages (up to a cap of £1,875), but employers must input the remainder to ensure employees still receive the full 80%, the law firm added.
On announcing the arrest of the Bradford duo, the Revenue’s taxpayer protection taskforce director Janet Alexander said HMRC would “not hesitate to act on reports of abuse of the [furlough] scheme”.
Formerly of the department, Tax Resolute's Ms Rahman warned last night: “HMRC is now buckling down on the inaccuracies and the ‘deliberate errors’ to clawback funds from furlough claims.”