Source · Select Committees · Public Accounts Committee
Recommendation 17
17
Accepted
The main cause of error and fraud on CJRS was furlough paid to employers for...
Recommendation
The main cause of error and fraud on CJRS was furlough paid to employers for employees who were still working. HMRC recognised at the start of CJRS in spring 2020 that there was a high risk that employers would exploit the scheme by claiming furlough for employees that continued to work. HMRC accepted that it could not prevent such claims and it intended to recover sums through post-payment compliance activity. HMRC’s estimates indicated that £2.3 billion was paid to employers for periods when employees were working. HMRC began deploying significant numbers of staff to its post- payment compliance activities to recover overpayments from October 2020. By March 2022, HMRC’s compliance work targeting employers who claimed furlough for working 21 Q 50; HMRC, Annual Report and Accounts 2021 to 2022, HC 494, 18 July 2022 22 HMRC, Error and fraud in the COVID-19 schemes: methodology and approach (an update for 2022), 18 July 2022, Table A1 and Table A2, https://www.gov.uk/government/publications/measuring-error-and-fraud-in-the-covid- 19-schemes/error-and-fraud-in-the-covid-19-schemes-methodology-and-approach-an-update-for-2022 (accessed 2 December 2022) 23 Public Accounts Committee, Fraud and Error, Ninth Report of Session 2021–22, HC 253, 30 June 2021 24 Qq 58–59, 81 25 CES0002, Cifas, paras 4, 6–8, published 17 November 2022 26 CES0001, Chartered Institute of Taxation, paras 5.20 to 5.22, published 17 November 2022 COVID employment support schemes 13 employees had closed 254 cases and had yielded only £640,000.27 We asked HMRC why it had found so few cases. It told us that it could identify working while furlough at the ‘extremes’, for example, where it could find evidence of economic activity by an employer that claimed to have furloughed 100% of their staff for 100% of the time. However, for most stages of CJRS, when furloughed employees could legitimately work part time, HMRC said it was difficult for its staff to determine whether people were working at times when t
Government Response Summary
HMRC will transition COVID-19 scheme compliance activity to be worked alongside business-as-usual tax compliance by September 2023 and has developed a unit of expertise to ensure that knowledge gained in tackling COVID-19 scheme risks can be used to support the wider business- as-usual teams going forward.
Government Response
Accepted
HM Government
Accepted
3: PAC conclusion: HMRC’s performance in recovering the £2.3 billion incorrectly paid to employers claiming furlough for employees who continued to work has been woeful. 3: PAC recommendation: HMRC should set out, in its Treasury Minute response, how it will improve its ability to recover furlough claimed for employees who continued to work. 3.1 The government agrees with the Committee’s recommendation. Target implementation date: April 2024 3.2 HMRC will continue to address COVID-19 schemes compliance risks where it is cost effective to do so. Following two years of a taskforce approach, targeting the highest value and riskiest claims, HMRC will transition COVID-19 scheme compliance activity to be worked alongside business-as-usual tax compliance by September 2023. This is the most cost- effective way to ensure taxpayers’ money continues to be protected and recovered, as it enables HMRC to deal with all aspects of a customer’s potential non-compliance in a single check. 3.3 With the schemes closed, as action has already been taken on the riskiest claims, HMRC expects to start seeing diminishing returns, with cases of lower value and risk in the pipeline – such as the remaining profile of ‘employers claiming for employees who are working’. Therefore, HMRC has assessed that it is more cost effective for these risks to be worked on alongside business-as-usual tax compliance activity. This approach enables HMRC to deal holistically and efficiently with all aspects of a customer’s potential non-compliance issues, related to the COVID-19 schemes and more widely. 3.4 HMRC has developed a unit of expertise to ensure that knowledge gained in tackling COVID-19 scheme risks as part of the taskforce can be used to support the wider business- as-usual teams going forward.