Furlough Fraud – How to protect your business

The government have paid out huge sums in grants to support businesses during the Covid pandemic. This has been a lifeline for many businesses and employees, but unfortunately there are always those who will use the system fraudulently.

Claims are submitting by the businesses, so they are not checked, there was no time to do so, so the potential for fraud is high. Many employees have been asked to work while furloughed by their companies or to carry out alternative roles.

There is a furlough fraud hotline to ‘dob in’ fraudulent employers, it has received over 10,000 reports where employees have been asked to work whilst being claimed as furloughed. This may not have been deliberate, it took a while for the nitty gritty of the rules to become clear and HMRC introduced an amnesty for incorrectly submitted claims. They are not out to punish those who have made honest mistakes, but they do want to catch those abusing the system on purpose.

The penalties for this fraud can be severe, repaying the grants, fines and prison sentences included.

There will inevitably come the investigations into claims, so it is best to prepare for this possibility and ensure you would pass any investigation without stress.

Suggested steps to take:

  • Have notification to furloughed workers regarding their furlough and the agreement for them to return to work and the hours/rates.
  • Confirmation of the employees agreement would be best practice.
  • Record for each employee of:
    • amount claimed
    • Claim period
    • Calculations
    • Usual Hours and calculations for these
    • Actual payment amount
  • Confirmation employee was employed at the relevant date to be eligible for furlough
  • A record of when furloughed and when working – especially if on flexible furlough

If you are notified of an investigation then gather together evidence of:

  • Employees being told not to work during furlough, by email, out of office notifications or signed statements by the employees
  • Any training carried out to prove it was training and not work
  • If an employee was clinically high risk and needed to shield
  • caring responsibilities that meant they had to be furloughed
  • 8 weeks notice from women returning form maternity leave
  • any adjustments to previous claims made.

By ensuring you have these details ready and have ensured compliance not only means you are following good practice but enables you to identify and rectify any errors prior to investigation and you would easily be able to prove your compliance.

Written with help from accountingweb.co.uk

Published by Holly

Licensed accountant and bookkeeper, sole trader, looking to save business people the tedium of record-keeping and accounting as I enjoy it!

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