COVID 19: HMRC Tackle Furlough Fraud

New measures have been put into place to tackle those who have abused the Coronavirus Job Retention Scheme (CJRS).

How will HMRC tackle furlough fraud?

On 29 My 2020, HMRC released draft legislation aimed at penalising the abuse of the Coronavirus Job Retention Scheme.

The new legislation will introduce a 30-day amnesty window for businesses to confess any errors or deliberate abuse were made in relation to the furlough scheme. After the 30 day window, HMRC is expected to begin recovering overpayments and penalise fraudsters.

HMRC have already received 2,000 claims of abuse of the CJRS reported between 1 April and 2 June 2020. Nearly 900 of these claims have already been reviewed. HMRC have requested that workers should report employers who have abused the scheme.

What kind of furlough fraud will be penalised?

It is expected that HMRC will be focusing on larger claims rather than smaller ones. Those who have asked people to continue working despite claiming furlough payments will be penalised.

HMRC is also likely to be sympathetic with regards to those who have made innocent mistakes with regards to the scheme, rather than those who have deliberately set out to abuse the scheme.

Challenges HMRC will face when recovering furlough payments:

HMRC is eager to recover fraudulent furlough payments however, accessing the money that has been given to fraudsters is expected to be much more difficult.

Due to lockdown HMRC also faces challenges as they are unable to do any site visits or in-person meetings.

Despite providing a 30 day period for mistakes or fraudulent behaviour in relation to the Coronavirus Job retention Scheme, it is expected that this won’t be effective in changing behaviours. It has also been suggested that a longer period could have been more effective to tackle fraudulent claims.

What is a Tax Investigation?

A tax investigation is an enquiry conducted by HMRC into the tax affairs and tax payment history of any UK individual, employee, director or company. A HMRC tax investigation can come in many forms and covers a range of taxes covered under HMRC jurisdiction such as: VAT; income tax; corporation tax and capital gains tax.

The type and severity of the investigation is completely dependent on the facts of any individual case. Typically, an investigation generally commences when HMRC notice irregularities in information supplied via a Self Assessment Tax return. A taxpayer will receive a letter from HMRC informing  them that an investigation has been opened into their tax affairs and may include a request for information.

It is strongly recommended that you consult a tax lawyer as soon as possible to receive detailed advice on how to take control of the situation and negotiate with HMRC.

How will you know if you are subject to a HMRC investigation?

HMRC will notify a taxpayer in writing when it commences to examine their tax affairs. Typically, if HMRC starts a formal civil investigation, a letter will be sent requesting more information. For example, a taxpayer may receive a request for information on a property transaction or further information about a tax return from a local compliance audit.

However, if HMRC suspects criminal VAT fraud or high amounts of tax evaded then it may commence criminal investigations. Typically, unlike for a civil investigation, HMRC are unlikely to notify you at the start of the process but instead you will be informed once you receive a letter requesting attendance to a voluntary interview under caution or when you are arrested.

Alternatively, even where criminal tax evasion is suspected, HMRC may wish to deal with the investigation through the civil route under Code of Practice 9.  This process offers a taxpayer a civil solution for potentially criminal evasion by allowing a full disclosure under contract (Contractual Disclosure Facility).

It is crucial that once under review, specialist Tax Investigation Lawyers are instructed. We regularly liaise with HMRC at formal meetings, agree what the scope of the disclosure should be and prepare the report on your behalf and reach a civil settlement with HMRC.  We have wide-ranging experience in assisting those facing a COP 9 investigation whilst helping to navigate the rigid time-limits and strict rules.

How long will a tax investigation last?

It depends on the scope and nature of the HMRC investigation. The opening letter issued by the HMRC is usually a good guide on the potential length of any investigation. Some tax investigations finish after one letter; other investigations can take months with HMRC consistently requesting more information; and some investigations can be extending to longer than a year if involving complex tax structures or large businesses.

It is important to engage professional advice early on to minimise the length of any investigation as we identify any problems quickly and efficiently to get to the heart of the matter.

Expert London Tax Investigation Lawyers

If you need HMRC Tax Investigation advice, we are available to aid you at every stage of the HMRC investigate process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, criminal tax evasion and HMRC enquiries and investigations. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.

Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and respected advice, which can make a pronounced difference to eventual tax penalties, charges and liability.

We provide urgent advice and representation to clients from our unique expert team of established Tax and Duties specialist solicitors and barristers with a proven track record of delivering authoritative results. Just call us on 0207 1830 529, or email [email protected].