Source · Select Committees · Public Accounts Committee
Recommendation 21
21
Rejected
We have previously expressed concern about the small number of criminal prosecutions for tax fraud.35...
Conclusion
We have previously expressed concern about the small number of criminal prosecutions for tax fraud.35 As part of our inquiry into fraud and error across COVID-19 support schemes, we were also concerned that inconsistencies between Departments in their approaches to the consequences of fraud and error for different groups.36 We therefore asked about the number of criminal investigations HMRC had initiated into fraud on the COVID-19 employment support schemes. In March 2022, HMRC had 24 investigations underway linked to CJRS and SEISS fraud, covering suspected fraudulent claims worth £13 million.37
Government Response Summary
The government disagrees with the Committee’s recommendation and states that HMRC will continue its compliance activity on COVID-19 schemes and consider whether penalties can be charged within the legal framework but is unable to pre-determine case outcomes.
Government Response
Rejected
HM Government
Rejected
5.1 The government disagrees with the Committee’s recommendation. 5.2 In line with the recommendation, HMRC will continue its compliance activity on COVID-19 schemes and consider whether penalties can be charged within the legal framework. However, HMRC is unable to pre-determine case outcomes and as a result, is unable to determine whether there will be an increase in penalties in the future. 5.3 Legislation was included in Finance Act 2020 to enable HMRC to carry out compliance activities in relation to those claiming support from the COVID-19 employment support schemes. The legislation specifically provided that penalties would only be charged where grants were deliberately overclaimed. The compliance approach, supported by Parliament, was designed to recognise that claimants might make mistakes given the new and changing obligations under the schemes. 5.4 The test for charging penalties in the COVID-19 employment schemes is for HMRC to show, on the balance of probability, that the person knew either at the point of claim that they were not entitled to the Covid grant, or that they had ceased to be entitled to the grant. Penalties can only be applied where it is lawful for HMRC to issue them, and there is sufficient evidence of deliberate behaviour that could be shown in a tribunal or in court. 5.5 Since the start of compliance activity on the HMRC-administered COVID-19 employment support schemes, HMRC has charged over £12.8 million in penalties in addition to recovering over £1 billion of overclaimed support through its compliance checks. Claimants also have the chance to put things right, without fear of sanctions by repaying their claim, and HMRC has received over £1 billion in repayments outside its compliance checks.