Earlier this year, John Glen, economic secretary to the Treasury, said that the government has “taken the issue of potential fraud relating to Covid grant schemes extremely seriously (but) it would have been impossible to prevent all related fraud.”
In fairness to the government, the peculiarly stressful conditions of the last few years necessitated prompt and dramatic action. Yet HMRC’s own estimate of the amount lost to what is called “fraud and error” in the various support schemes is some £5.8bn. This is over 7% of the total spend of £81.2 billion. Of that £5.8bn, 8.7% is down to the Coronavirus Job Retention Scheme, 2.5% to the Self-Employment Income Support Scheme and 8.5% went in the Eat Out to Help out Scheme. Many of us benefited in one way or another from these schemes.
Perhaps stung by the considerable criticism it has received, notably the resignation of a government peer over HMRC’s lamentable record on tackling this fraud, the government is now increasing their efforts to investigate suspected abuse and fraud in these various relief schemes. This will largely be the duty of the Taxpayer Protection Taskforce, which was brought into being following the 2021 budget. The taskforce employs some 1,250 HMRC staff and has £100m in resources at its disposal.
Arrests followed, starting in 2020 and continuing today. These included forfeiture orders of £26.5m in October 2021, obtained during a furlough fraud described as involving “eye-watering” sums and brought to light by investigative reporting by the Financial Times. Some £500 million was recovered in 2021, but this will only make a tiny dent in that total of £5.8 billion.
HMRC themselves state that the majority of arrests have been made on suspicion of cheating the public revenue, VAT evasion, and money-laundering offences. However, they also acknowledge that most error and fraud was as a result of mistakes or inflated claims, often small amounts in each case.
Herein lies the problem, for small businesses especially. Governments weren’t the only people stressed by the pandemic and it is not too hard to make an honest mistake when dealing with the taxman. If you are at all worried about this, then our advice is, first, to review your internal records and systems and identify any areas of concern. Where you detect what you think maybe a discrepancy, we recommend a more detailed examination before you make contact with HMRC. M&S can help you here.
You also need to make sure that all your paperwork is up to date. You should also collate any documentation which details the business rationale upon which you made your claim(s). Providing a clear audit trail helps shows that you have acted in accordance with the law. But, if you are in any doubt, please do speak to us.