What is the Taxpayer Protection Taskforce?
In the Budget 2021, presented to Parliament on 3 March, the Chancellor announced that HMRC will establish a taskforce to investigate those who have fraudulently made use of government schemes set up to protect individuals and businesses against the economic impact of COVID-19 – such as the Coronavirus Job Retention Scheme (CJRS) (widely referred to as the Furlough scheme) and the Self-Employment Income Support Scheme (SEISS). In addition, we were told that the government will raise awareness of enforcement action in order to deter fraud, and will significantly strengthen law enforcement for Bounce Back Loans.
Backed by £100m of government money, the Taxpayer Protection Taskforce will deploy a team of more than 1,250 HM Revenue and Customs officials to investigate individuals and companies who have fraudulently claimed funding under these schemes, potentially leading to prosecution in some cases.
The potential scale of the problem had previously been raised in the House of Commons Public Accounts Committee, where HMRC CEO Jim Harra appeared before MPs in September 2020. He confirmed HMRC’s assumption that between 5% and 10% of claims related to the furlough scheme would be fraudulent. This was equated to “between £2.0 billion to £3.9 billion” in a National Audit Office report published in October 2020. This report also confirmed that for the first SEISS grant, HMRC’s planning assumption was that fraud and error could range from 1-2% - something that HMRC’s Jo Rowland confirmed to MPs in a follow up session in November 2020.
MPs continued to raise concerns and in December 2020 highlighted that HMRC does not know the “actual level of fraud and error in the schemes and will not have a complete estimate until the end of 2021 at the earliest”. In a related inquiry into the Bounce Back Loan scheme, for which UK taxpayers “face covering billions of pounds … with potential losses estimated in the region of £15 billion to £26 billion”, the committee confirmed that “while the Government estimates the majority of this will be credit losses, where the borrower wants to repay the loan but cannot – it lacked the data to assess the levels of fraud within the Scheme…”
See our related blog £26 billion fraud: The other side of the Coronavirus Business Interruption Loan Schemes.
You can read more on Furlough Fraud offences and sanctions here.
What does this news mean for businesses?
Given the significant investment by the government and the sheer scale of the suspected fraud, it is expected that HMRC will be relentless in pursuing those who have taken unfair advantage of the government's financial support, deploying new enforcement powers introduced under the Finance Act 2020 (enacted on 22 July 2020). The creation of a dedicated taskforce comprising more than 1,250 HMRC personnel demonstrates both the scale of the problem and the determination to go after those who have fraudulently benefited. COVID-19 related fraud is likely to take on an increasingly prominent role in law enforcement activities over the coming months and, most likely, years.
It is essential that businesses across all sectors have robust measures in place to prevent, identify and report fraud, and that when fraud is suspected appropriate action is taken. This may involve conducting an internal investigation, preferably handled by external lawyers, and in some cases companies may need to self-report to HMRC. Other important considerations will likely arise, such as employment law obligations concerning employees suspected of carrying out the fraud, statutory duties imposed on directors of the company and reputation management issues. The most important thing a company should do when dealing with suspected fraud is seek specialist legal advice immediately. Ignoring the issues or turning a blind eye not only has serious ramifications for the business but also for its directors, officers, senior managers and owners; ignorance is far from bliss.