Source · Select Committees · Public Accounts Committee
Recommendation 22
22
Acknowledged
We asked HMRC why the number of prosecutions was so low and why it was...
Conclusion
We asked HMRC why the number of prosecutions was so low and why it was not being tougher on those who had made fraudulent claims for employment support. HMRC told us that its approach was broadly the same as it applied to the tax system, where it used civil means to tackle fraud, including penalising people who have committed deliberate fraud and giving penalties for deliberate behaviour, and it reserved the right to conduct a criminal investigation and to prosecute people if it believed that this was the best way of tackling fraud. HMRC updated us on the number of criminal and civil investigations. Thirty-one criminal investigations were underway in November 2022, and HMRC had made 56 arrests.38 In comparison, it had opened 49,908 civil cases by October 2022, of which it had completed 34,860.39 Civil cases focus on opportunistic fraud. HMRC told us it that its criminal investigations were long, difficult, and very resource intensive because of the standard of evidence that it needed to reach to be able to demonstrate deliberate fraudulent behaviour. It said it reserved criminal investigation for cases that were “incredibly serious”, where its intent was to remove criminal operators as well recover money. It also said that when the schemes were open it publicised the arrests arising from its criminal investigations.40
Government Response Summary
HMRC explained that its approach to fraud in the schemes was similar to the tax system, using civil means primarily and reserving criminal investigations for very serious cases. They updated the committee on the number of criminal and civil investigations underway.
Government Response
Acknowledged
HM Government
Acknowledged
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.