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HMRC has started investigating businesses it suspects of abusing the furlough scheme, reports accountants, business and financial advisers Kreston Reeves.
Investigations are focused on businesses that deliberately or inadvertently allowed staff to work whilst on furlough and are in advance of new legislation that will introduce a 90-day amnesty for businesses.
Andy Wallis, a Partner in the Corporate Tax team at Kreston Reeves comments.
“The Coronavirus Job Retention Scheme has been a lifeline for many businesses, yet there is increasing evidence that it is being abused, for example, by employers asking staff to work whilst on furlough. Whilst it is clear that this is wrong, businesses may easily find that they have inadvertently breached the rules as little guidance was available when the first claims were being submitted.
“HMRC has a duty to investigate where it believes fraudulent activity is happening, so it is not surprising that investigations are already underway.
“And with legislation shortly to receive Royal Assent that will introduce a 90-day amnesty allowing businesses to repay furlough money claimed in error without threat of sanction or penalty, HMRC is sending a clear message to businesses – take advantage of this amnesty or face investigation. It is clear that HMRC hope its amnesty will raise significant revenues.
“Businesses that do not take advantage of such an amnesty and are later found to have stretched the rules may find themselves under serious investigation and facing fines.
“It is vitally important that businesses keep good and clear records of staff on furlough, particularly as it is now possible to allow staff to return part time. Businesses should also be able to demonstrate clear communication to staff on furlough that explains the rules.
“Replying to investigations does take up valuable management time. Many businesses have access to assistance when replying to HMRC on such investigations and enquiries either through the Tax Investigation Services offered by their accountants and tax advisor or through their business insurance policies. Details of whether this is covered is advisable. If not already in place, businesses should consider getting such assistance. At Kreston Reeves we can confirm that such assistance is included within the Tax Investigation Service that we provide our clients.”