Recommendation 5

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. Despite the billions of pounds lost in error and fraud, HMRC has taken little action to punish culprits. It asserts that it limits its criminal investigations to the most serious cases of fraud committed by criminals. HMRC was undertaking just 31 criminal investigations in November 2022 compared to the almost 50,000 civil cases it had opened by October 2022. Civil cases focus on claims that HMRC considers may represent opportunistic fraud. Most employers that committed opportunistic fraud within CJRS by intentionally overclaiming were smaller companies. HMRC can penalise employers if it can prove they deliberately overclaimed, but it admitted suspicious cases are not treated as outright fraud if deliberate behaviour cannot be proved. By March 2022, HMRC had only issued penalties on CJRS totalling £1.1 million, just 0.5% of the value of overpayments it had identified. Consequently, employers who had overclaimed furlough have little incentive to voluntarily repay grants as they are unlikely to be penalised if identified by HMRC’s compliance teams. 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.