COVID support fraudsters escape prosecution

The Public Accounts Committee's (PACs) 'Fortieth Report - COVID employment support schemes' is highly critical of both HMRC and HM Treasury in their poor efforts to recover fraudulently claimed COVID support. 

The report praised the speedy implementation of the COVID support Coronavirus Job Retention Scheme (CJRS) 'furlough' and the Self-Employment Income Support Scheme (SEISS) which cost the taxpayer some £97billion.

The PAC highlight the fact that an estimated £4.5billion was lost in fraud: Government was too slow to manage problems and failed to persue fraudsters.

• A lack of useful data on taxpayers led to poor scheme designs: some in genuine need missed out and support was given to those were it was not actually needed.
• HMRC’s performance in recovering the £2.3 billion incorrectly paid to employers claiming furlough for employees who continued to work has been 'woeful'. 
• The premature closure of the Taxpayer Protection Taskforce could cost up to £5.1 billion in lost taxpayers' money.  
• The absence of effective criminal and civil sanctions provides little incentive for those who overclaimed COVID-19 employment support to make repayments.
• Lessons should be seen to be learned.

Dame Meg Hillier MP, Chair of the Committee, said, "Bad actors in British business are running rings around the Revenue... While money that genuinely saved jobs and households was got out admirably quickly, the weak recovery effort will fail to deter potential future criminals. Too many companies claimed that shouldn’t have and now won’t give it back.”

The Public Accounts Committee's conclusions and recommendations:

• The Departments do not have a good enough understanding of the impacts of the £97 billion of taxpayers’ money they spent on the COVID-19 employment support schemes.
  • Recommendation 1a: The Departments should, by December 2023, publish their final evaluations of CJRS and SEISS, which should cover their wider impacts including on business and people who were ineligible, economic inactivity amongst the over 50s, second jobs for furloughed staff and consequences of support for those not adversely affected by the pandemic.
  • Recommendation 1b: The Departments should, by December 2023, work with other relevant countries to develop a better understanding of how UK unemployment support schemes and those in other comparable countries compare and publish the results.
• Gaps and lags in HMRC’s data contributed to the schemes providing excessive support to some, while others in need were ineligible.
  • Recommendation 2: The Departments should set out, by July 2023, their priorities for obtaining data which would enable the better targeting of economic support. In doing so, they should consider how they can keep burdens on customers proportionate.
• HMRC’s performance in recovering the £2.3 billion incorrectly paid to employers claiming furlough for employees who continued to work has been woeful. 
  • Recommendation 3: HMRC should set out, in its Treasury Minute response, how it will improve its ability to recover furlough claimed for employees who continued to work.
• HMRC’s decision to close the Taxpayer Protection Taskforce in 2023–24 puts at risk the recovery of taxpayers’ money paid out as a result of error and fraud. 
  • Recommendation 4a: HMRC should continue compliance work on the COVID-19 employment support schemes while it remains cost-effective to do so. It should set out, in its Treasury Minute response, how it will assess the cost-effectiveness of continuing compliance work after September 2023, and how it would compare to addressing fraud on other government spending.
  • Recommendation 4b: HMRC should report annually in its Report and Accounts the yield it obtains from COVID-19 employment support schemes and the levels of unrecovered error and fraud until it stops its COVID-19 grants compliance activity completely.
• We are concerned that in the absence of effective criminal and civil sanctions, there is little incentive for those who overclaimed COVID-19 employment support to make repayments.
  • Recommendation 5a: HMRC should increase the number of employers it penalises for making excessive claims and incentivise other employers to repay grants they have wrongly claimed.
  • Recommendation 5b: HMRC should set out, in its Treasury Minute response, its estimates of the number and value of furlough claims where it suspects, but cannot prove, that employers intentionally overclaimed and its latest data on the amounts it has recovered from those employers.
• The Departments have yet to fully capture the lessons that must be learnt from the employment support schemes to inform future large-scale government financial interventions.
  • Recommendation 6: The Departments should, by December 2023, publish the lessons that can be learned from the schemes for large-scale financial interventions in the future, and what actions they will take as a result.

Useful guides on this topic

COVID-19: Government support tracker
This tracker covers measures announced by the government to support individuals and businesses through COVID-19.  

Taxation of Coronavirus support payments
This guide summarises the tax treatment of grants paid during the Coronavirus pandemic.

COVID-19: Coronavirus Job Retention Scheme (CJRS) to 30 September 2021
What is CJRS? When does the CJRS apply? How to claim CJRS. How to calculate CJRS claim amounts.

Joint & Several Liability of Company Directors etc
When can company directors or LLP members become jointly and severally liable for company or LLP tax liabilities and penalties? Finance Act 2020 has provided HMRC with wide-ranging new powers. What are the conditions and what are the rights of appeal?

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences?

External links

The Public Accounts Committee: Fortieth Report - COVID employment support schemes