New report confirms HMRC doesn’t know the true cost of furlough fraud

New report confirms HMRC doesn’t know the true cost of furlough fraud


Originally HMRC predicted that the cost of fraud and error to the CJRS would be between 1% to 2%.

However, according to HMRC’s planning assumption, the total cost could range from 5% to 10%. In real terms, that’s between £2.0bn to £3.9bn. 

While the NAO report explains that HMRC’s initial estimates were based on assumption rather than evidence, it is a concern that this large figure has been estimated on a number based on out-of-date samples. HMRC’s predictions were made based on payments made up to mid-September, meaning that the current cost is unknown.

A third of employees were asked to work while furloughed 

NAO has confirmed that HMRC’s fraud hotline received more than 10,000 reports which it claims is mainly related to furlough fraud.

To date, the department has not yet carried out studies to estimate the scale of the issue. However, the NAO has. It carried out a survey which found:

9% [of those surveyed] admitted to working in lockdown at the request of their employer, and against the rules of the scheme. Other surveys indicate between 7% and 34% of furloughed employees surveyed worked at the request of their employer while furloughed.

One of these ‘other surveys’ was conducted by Crossland, an award-winning legal firm specialising in employment law.

It commissioned a poll which asked 2,000 furloughed full-time staff about their experiences of furlough. The employees worked across a variety of sectors.

Of those furloughed staff:

  • A third were asked to carry on doing their usual job, while 29% were told to undertake more administrative tasks.
  • One in five have been asked to either cover someone else’s job or to work for a company linked to their employer while on furlough.
  • The rule breaking was evenly spread across SMEs and larger corporates.

In June, plans were drafted to introduce a 30-day confessional window for those abusing the system. However, HMRC has yet to confirm when this will come into effect.

Crossland managing director Beverley Sunderland stated:

Since the Coronavirus Job Retention Scheme was launched about three months ago, we’ve received an avalanche of calls from worried employees, all unrelated to our own clients and many with the same story: I’ve been furloughed but my employer has asked me to keep working.

This is fraud that is impacting many industries, job roles and seniority levels. In one case in the manufacturing sector the employer had not only asked the furloughed employee to work but had also imposed a 20% pay cut, so their workforce was costing them nothing.

An ultimatum: work or leave the country

Crossland has been contacted from employees across industries with similar stories: they were furloughed and asked to work otherwise they wouldn’t be paid. In some cases, they were threatened with dismissal which would mean having to leave the UK.

Sunderland explained:

We heard from employees in the graphic design industry: some had been asked to continue working one day a week so they could be paid 100% of their salary.

We’ve had cases of employees working on a work permit (sponsorship licence) in the professional services industry told they must continue working when furloughed or face being dismissed and asked to leave the country. 

Furloughed employees in the appliance fitting business asked to carry out orders to justify the ‘money’ they were being paid. Investment companies trying to use the scheme as an alternative to performance management – if an employee isn’t hitting target, they were furloughed or threatened with furlough.

However, manipulating furloughed employees into work isn’t the only type of furlough fraud HMRC has found.

The government will rely on whistleblowers in the future

The NAO concluded that HMRC “would tackle fraud through whistleblowing and retrospective compliance work”. However, it’s not as straightforward as it may seem.

Employees would not have necessarily been aware that their employer was part of the government furlough scheme unless their employer had informed them. If this information hadn’t been communicated, it is possible that an employee wouldn’t be aware of that they were complicit in committing fraud. 

To help employees, HMRC intends to publish the names of employers who claimed. HMRC may even notify employees through their personal tax accounts when an employer has claimed to increase transparency. 

The initial question is why weren’t employees notified. The NAO explained:





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