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Source · Select Committees · Public Accounts Committee

Fortieth Report - COVID employment support schemes

Public Accounts Committee HC 810 Published 8 March 2023

Report Status

Government responded

Conclusions & Recommendations

26 items (14 recs)

Source

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Government Response

AI assessment · 23 of 26 classified

Not Addressed 2

Recommendations

14 results

2 Accepted

Gaps and lags in HMRC’s data contributed to the schemes providing excessive support to some,...

Recommendation

Gaps and lags in HMRC’s data contributed to the schemes providing excessive support to some, while others in need were ineligible. We have previously reported that data limitations contributed to some people being excluded from the schemes, including the newly … Read more

Government Response Summary

The government agrees with the committee's recommendation and has consulted on options for improving the range of data HMRC collects, uses and shares, including collecting data on employee hours worked, dividends received, and start and end dates of self-employment, with implementation planned from April 2024.

HM Treasury

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3 Accepted

HMRC’s performance in recovering the £2.3 billion incorrectly paid to employers claiming furlough for employees...

Recommendation

HMRC’s performance in recovering the £2.3 billion incorrectly paid to employers claiming furlough for employees who continued to work has been woeful. When it introduced CJRS in spring 2020, HMRC recognised that there was a high risk that employers would … Read more

Government Response Summary

HMRC will transition COVID-19 scheme compliance activity to be worked alongside business-as-usual tax compliance by September 2023 as the most cost-effective approach and has developed a unit of expertise to support wider teams with knowledge gained. Target implementation date is April 2024.

HM Treasury

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4 Accepted

HMRC’s decision to close the Taxpayer Protection Taskforce in 2023–24 puts at risk the recovery...

Recommendation

HMRC’s decision to close the Taxpayer Protection Taskforce in 2023–24 puts at risk the recovery of taxpayers’ money paid out as a result of error and fraud. In April 2021, HMRC set up the Taxpayer Protection Taskforce as a dedicated … Read more

Government Response Summary

HMRC will continue compliance work on the COVID-19 employment support schemes while it remains cost-effective, assessing cost-effectiveness by reviewing COVID-19 scheme risks alongside business-as-usual tax risks from September 2023. HMRC will publish COVID-19 compliance outcomes in the HMRC Annual Report and Accounts for 2022-23 and will maintain internal management information.

HM Treasury

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5 Rejected

We are concerned that in the absence of effective criminal and civil sanctions there is...

Recommendation

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 … Read more

Government Response Summary

The government disagrees with the 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.

HM Treasury

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6 Not Addressed

The Departments have yet to fully capture the lessons that must be learnt from the...

Recommendation

The Departments have yet to fully capture the lessons that must be learnt from the employment support schemes to inform future large-scale government financial interventions. We have stressed throughout our work examining the COVID-19 pandemic the vital importance of government … Read more

Government Response Summary

The government response is completely unrelated to the recommendation, and instead discusses DVLA driving license backlogs.

HM Treasury

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9 Accepted

The Departments told us that in the longer-term they were interested in comparing outcomes from...

Recommendation

The Departments told us that in the longer-term they were interested in comparing outcomes from the schemes in the UK with other countries, as many other developed countries ran similar schemes but designed them in slightly different ways. For example, … Read more

Government Response Summary

HM Treasury and HM Revenue and Customs will continue their engagements with other relevant countries, to understand their experiences and the impacts of implementing similar employment support schemes, and comparative evidence will be included in the CJRS and SEISS final evaluations by December 2023.

HM Treasury

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12 Accepted

We asked the Departments whether they now knew what data they were missing and what...

Recommendation

We asked the Departments whether they now knew what data they were missing and what they needed to collect to allow them to be better prepared in future. HMRC told us that since the schemes had closed it had run … Read more

Government Response Summary

The government consulted on options for improving the range of data HMRC collects and following consideration of the views of respondents to the consultation, the government will prioritise three options to be taken forward in a future Finance Bill with the intention to collect this data from April 2024.

HM Treasury

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13 Accepted

In December 2020 we reported that the age of HMRC’s Self Assessment system made it...

Recommendation

In December 2020 we reported that the age of HMRC’s Self Assessment system made it more difficult for HMRC to provide financial support for the self-employed. HMRC has an existing programme, Making Tax Digital, which will lead to self-employed people … Read more In December 2020 we reported that the age of HMRC’s Self Assessment system made it more difficult for HMRC to provide financial support for the self-employed. HMRC has an existing programme, Making Tax Digital, which will lead to self-employed people providing quarterly information on their expenses and income rather than a single annual tax return. HMRC recognised that it was taking longer than it would like to implement Making Tax Digital, but stressed that this was a key reform that would give it access to more real-time data on self-employment and would make it easier to include the self-employed in future schemes.19 In September 2021, HMRC announced that the introduction of Making Tax Digital for self-employed people would go back a year to 2024–45. We pressed HMRC on whether Making Tax Digital would be in place by 2024–25. It did not commit to 2024–25, saying it would be quite pressured for both it and software houses and small businesses to be ready in time and it would keep the delivery date under review.20 16 Committee of Public Accounts, Covid-19: Support for jobs, para 13 and page 6; C&AG’s Report, Implementing employment support schemes in response to the COVID-19 pandemic, Session 2019–2021, HC 862, October 2020, Figure 6; and HM Treasury, Treasury Minutes: Government responses to the Committee of Public Accounts on the Thirtieth to the Thirty-Fourth reports from Session 2019–21, CP 389, February 2021 17 C&AG’s Report, paras 11, 2.13 18 Qq 2, 72–73; HMRC, Improving the data HMRC collects from its customers, 20 July 2022, https://www.gov.uk/ government/consultations/improving-the-data-hmrc-collects-from-its-customers/improving-the-data-hmrc- collects-from-its-customers (accessed 2 December 2022) 19 Qq 35, 72; Committee of Public Accounts, Covid-19: Support for jobs, page 5 20 Qq 78–80; HMRC, Businesses get more time to prepare for digital tax changes, September 2021, https://www. gov.uk/government/news/businesses-get-more-time-to-prepare-for-digital-tax- Show less

Government Response Summary

The government agrees with the recommendation and will prioritise collection of data on employee hours worked, dividends received from owner-managed businesses, and start/end dates of self-employment, with intentions to collect this data from April 2024. It also mentioned making Tax Digital for Income Tax, which will provide a more up-to-date data picture of the income and expenditure levels of self-employed customers.

HM Treasury

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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 … Read more 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 Show less

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.

HM Treasury

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18 Accepted

HMRC established the Taxpayer Protection Taskforce in April 2021 to increase its compliance activities on...

Recommendation

HMRC established the Taxpayer Protection Taskforce in April 2021 to increase its compliance activities on the two employment support schemes and Eat Out to Help Out.29 HMRC told us it had received £100 million to fund the cost of moving … Read more

Government Response Summary

HMRC will continue compliance work on the COVID-19 employment support schemes as part of business-as-usual tax compliance activity, reviewing all COVID-19 scheme risks alongside business-as-usual tax risks from September 2023, and will continue to collect performance metrics. The target implementation date is April 2024.

HM Treasury

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19 Accepted

HMRC plans to wind up the Taxpayer Protection Taskforce between April and September 2023, returning...

Recommendation

HMRC plans to wind up the Taxpayer Protection Taskforce between April and September 2023, returning its staff to business-as-usual tax compliance activities. It said it would continue to look at non-compliance on the COVID-19 schemes as part of a customer’s … Read more

Government Response Summary

HMRC will continue compliance work on the COVID-19 employment support schemes as part of business-as-usual tax compliance activity, reviewing all COVID-19 scheme risks alongside business-as-usual tax risks from September 2023, and will continue to collect performance metrics. The target implementation date is April 2024.

HM Treasury

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23 Rejected

While HMRC had by October 2022 exceeded its target to open 30,000 civil cases on...

Recommendation

While HMRC had by October 2022 exceeded its target to open 30,000 civil cases on the employment support schemes during 2020–21 to 2022–23, the level of penalties it has issued has been small compared to both the overpayments it has … Read more While HMRC had by October 2022 exceeded its target to open 30,000 civil cases on the employment support schemes during 2020–21 to 2022–23, the level of penalties it has issued has been small compared to both the overpayments it has identified and the billions of pounds of error and fraud. By March 2022, HMRC had issued £3.5 million of penalties to those who overclaimed SEISS grants (the equivalent of 7% of total overpayments identified through its civil cases covering SEISS). For CJRS the figure was £1.1 million (0.5% of CJRS overpayments).41 We challenged HMRC about its approach on penalties as we were concerned that it does not provide an incentive for those who have identified they made an error in their claims to make a repayment. In particular, we asked HMRC why it had not issued penalties in four cases where the NAO found there were strong 34 C&AG’s Report paras 30.20, 3.36–3.37 35 For example, Committee of Public Accounts, Tackling tax fraud, 34th Report of Session 2015–16, HC 674, April 2016, pages 5 and 6; and Committee of Public Accounts, Collecting tax from high net worth individuals, 36th Report of Session 2016–17, HC 774, page 6 36 Public Accounts Committee, Fraud and Error, Ninth Report of Session 2021–22, HC 253, 30 June 2021 37 Qq 52, 84–86; C&AG’s Report, para 3.36 38 Q 84 39 Letter from Janet Alexander, Director, Compliance Operations, HM Revenue & Customs, to Chair of the Committee of Public Accounts, 21 November 2022 40 Qq 57, 84–86 41 C&AG’s Report, paras 3.26, 3.38 COVID employment support schemes 15 indications that claimants may have deliberately inflated claims beyond their entitlement.42 HMRC said that it was not enough to be suspicious or sceptical about a claim - it had to demonstrate that a person deliberately made a false claim or over an over-claim to impose financial penalties. If a case went to Tribunal it would need evidence that the false claim or over-claim was deliberate. HMRC accepted that fraud may have occurred in the four cas Show less

Government Response Summary

HMRC disagrees and states it will continue its compliance activity on COVID-19 schemes and consider whether penalties can be charged within the legal framework. 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.

HM Treasury

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25 Accepted

We asked HM Treasury and HMRC what lessons they had learned that could be used...

Recommendation

We asked HM Treasury and HMRC what lessons they had learned that could be used in the event of the next emergency, and what they would do differently in future. They identified successes they would like to preserve, in particular, … Read more

Government Response Summary

HM Treasury and HMRC will include lessons learned from the CJRS and the SEISS in the final evaluation reports to be published in 2023. They have also developed CJRS and SEISS playbooks that are kept updated and will be amended as necessary upon publication of the evaluations.

HM Treasury

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26 Accepted

We asked HM Treasury and HMRC whether they would establish a “how to” guide for...

Recommendation

We asked HM Treasury and HMRC whether they would establish a “how to” guide for responding to future crises. They told us that for the employment support schemes they had brought together material in a “playbooks” that people can use … Read more We asked HM Treasury and HMRC whether they would establish a “how to” guide for responding to future crises. They told us that for the employment support schemes they had brought together material in a “playbooks” that people can use in the future. We also asked about whether lessons learned would be set out clearly in their final evaluation. They said this was not the purpose of the public evaluation. Instead, they referred to their 42 Qq 87, 94; C&AG’s Report, paras 3.39 43 Qq 87–88, 97–98, 103 44 Q 70 45 Committee of Public Accounts, Initial lessons from the government’s response to the COVID-19 pandemic, 13th Report of Session 2020–21, HC 175, July 2021, pages 3, 6 46 Committee of Public Accounts, Government preparedness for the COVID-19 pandemic: Lessons for government on risk, 46th Report of Session 2021–22, HC 952, March 2022, pages 3, 7 47 HM Treasury, Treasury Minutes: Government Response to the Committee of Public Accounts on the Forty-Third to the Forty-Eighth report from Session 2021–22, CP 678, May 2022 48 Qq 112–113 16 COVID employment support schemes “playbooks”, which they said they would keep up to date.49 On error and fraud, in October 2022 HMRC updated its published summary of its approach to managing the risks of error and fraud, but this did not capture what lessons it had learnt and what should be done differently in any future crisis intervention.50 However, HMRC had previously told us it would look at drawing together its lessons from the schemes to support other parts of government that are tasked with disbursing funds at pace, such as the Household Support Fund.51 49 Qq 25, 114 50 HMRC, Tackling error and fraud in the Covid-19 support schemes, updated 13 October 2022, https://www.gov. uk/government/publications/hmrc-issue-briefing-tackling-error-and-fraud-in-the-covid-19-support-schemes/ tackling-error-and-fraud-in-the-covid-19-support-schemes (accessed 2 December 2022) 51 Committee of Public Accounts, HMRC performance in 2021–22, Thirty-th Show less

Government Response Summary

HM Treasury and HM Revenue and Customs will include lessons learned, where appropriate, from the CJRS and the SEISS in the final evaluation reports to be published in 2023. They have developed CJRS and SEISS playbooks, allowing for the rapid deployment of new employment and income support schemes in the future, if required. Target implementation date is by December 2023.

HM Treasury

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Conclusions (12)

Observations and findings

1 Conclusion Acknowledged

On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury and HM Revenue & Customs (HMRC) (collectively the Departments) on the COVID-19 employment support schemes.1

Government Response Summary

The government acknowledged that the committee took evidence from HM Treasury and HM Revenue & Customs (HMRC) on the COVID-19 employment support schemes and that this document is their response.

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7 Conclusion Not Addressed

We also asked the Departments whether the evaluations would cover the schemes’ effects on groups who were not eligible and groups that were supported, including those on furlough who took a second job.10 The Departments committed to looking at whether the evaluations could cover the groups of people not eligible …

Government Response Summary

The government response is completely unrelated to the conclusion, and instead discusses cancer waiting times and NHS funding.

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8 Conclusion Acknowledged

We pressed the Departments on the schemes’ wider impacts including whether the schemes had contributed to the increasing number of business insolvencies and the increasing level of economic inactivity, given that the number of inactive people over 50 increased by almost 500,000 between October to December 2019 and October to …

Government Response Summary

The Departments stated that final evaluations would examine the schemes’ impacts on inactivity but that there was no evidence of increasing inactivity being particularly related to the schemes. They added that there had been a legal embargo on creditor insolvencies which had created some pent-up pressure.

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10 Conclusion Accepted

In December 2020 we reported that an estimated 1.1 million people were excluded from the initial phases of CJRS because HMRC did not have sufficient data to verify claims. These people comprised 0.7 million limited company directors who took their income as dividends and 0.4 million short-term or freelancer workers …

Government Response Summary

The government agrees with the committee's recommendation and has consulted on options for improving the range of data HMRC collects, uses and shares, including collecting data on employee hours worked, dividends received, and start and end dates of self-employment, with implementation planned from April 2024.

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11 Conclusion Accepted

Weaknesses in the Departments’ data also contributed to the schemes providing support to taxpayers whose incomes were not significantly affected by the COVID-19 pandemic. Eighteen percent of the value of the first three SEISS grants—around £3.5 billon—was paid to people who saw their turnover increase in 2020–21 even without the …

Government Response Summary

The government agrees with the committee's recommendation and has consulted on options for improving the range of data HMRC collects, uses and shares, including collecting data on employee hours worked, dividends received, and start and end dates of self-employment, with implementation planned from April 2024.

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14 Conclusion

In July 2022, HM Revenue & Customs (HMRC) estimated that £4.5 billion had been paid to claimants as a result of error and fraud within the two schemes. It told us that this remained its best estimate of the extent of error and fraud within the two schemes.21 In July …

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15 Conclusion

As part of our initial inquiry into fraud and error across COVID-19 support schemes in June 2021, we concluded that departments did not make enough use of counter fraud expertise when designing new initiatives to ensure they minimise losses to the taxpayers, and that gaps in information sharing was hindering …

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16 Conclusion

We also received written evidence from the Chartered Institute of Taxation. It told us the SEISS application process was likely to have contributed to ineligible claims. It said that, because taxpayers rather than agents had to apply for SEISS, HMRC made the application process simple and straight forward, but in …

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20 Conclusion Acknowledged

The government’s policy is to pursue deliberately fraudulent behaviour, but not to penalise applicants for honest mistakes when claiming employment support. HMRC can pursue fraudsters through criminal investigations, which can result in cases going 27 C&AG’s Report, paras 3.5, 3.8, 3.31, Figure 10; C&AG’s Report, Implementing employment support schemes in …

Government Response Summary

The government's policy is to pursue deliberately fraudulent behaviour, but not to penalise applicants for honest mistakes when claiming employment support and HMRC can raise penalties of up to 100% of any overpayment where it has sufficient evidence of deliberate fraudulent behaviour, in addition to requiring the claimant to repay the amount of money that was overpaid.

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21 Conclusion Rejected

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 …

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.

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22 Conclusion Acknowledged

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 …

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.

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24 Conclusion Acknowledged

We have stressed throughout our work examining the COVID-19 pandemic the importance of government learning lessons from its preparedness and response. In July 2021, we reported that the Government’s response to the pandemic had been least effective in areas that we have repeatedly reported on, including data quality and data …

Government Response Summary

The government has stressed the importance of learning lessons from its preparedness and response to the COVID-19 pandemic. They cited work to build on the UK’s existing international collaborations including strong bilateral and multilateral relationships, to drive greater and broader collaboration on the global stage.

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