COVID-19 EXPERT LEGAL INSIGHTS

COVID-19 Fraud: HMRC ramps up its investigations activity

30 June 2021

In March 2021 the Chancellor announced the establishment of a taskforce to investigate those who may have fraudulently made use of government schemes set up to protect individuals and businesses against the economic impact of COVID-19 – such as the Coronavirus Job Retention Scheme (CJRS) (widely referred to as the Furlough scheme), the Self-Employment Income Support Scheme (SEISS) and the ‘Eat Out to Help Out’ Scheme.


Backed by £100m of government money, the Taxpayer Protection Taskforce has deployed more than 1,250 staff to investigate individuals and companies who may have fraudulently claimed funding under these schemes, and headlines this week reveal that almost 13,000 investigations are now underway.

See our related blog: Covid-19 Fraud New Taxpayer Protection Taskforce

A FOI request confirms that at the end of March 2021 there were 7,384 investigations in relation to the furlough scheme, 5,020 linked to the self-employment income support scheme and 424 related to eat out to help out. There is as yet no data on the current number of prosecutions.

This is a clear indicator of HMRC’s appetite for criminal enforcement action and given the significant investment by the government and the sheer scale of the suspected fraud, it is expected that HMRC will be relentless in pursuing those who have taken unfair advantage of the government's financial support.

The consequences can be far reaching. An individual who is involved in fraud related to the COVID-19 pandemic may commit one or more of the following offences:

  • Fraud by false representation (section 2, Fraud Act 2006);
  • False accounting (section 17, Theft Act 1968);
  • Conspiracy to defraud (common law offence);
  • Cheating the public revenue (common law offence);
  • Forgery (section 1, Forgery and Counterfeiting Act 1981); and
  • Money laundering (various offences under the Proceeds of Crime Act 2002)

It is also possible for a company, as a separate and distinct legal entity, to be liable for a criminal offence where the relevant conduct is carried out by a person deemed to be the directing mind and will of the company. Furthermore, a corporate may be investigated for the strict liability offence of failing to prevent the facilitation of tax evasion.

For more information see our earlier blog on: Furlough Fraud: the offences and sanctions

Other important considerations are likely to arise for a company, including employment law obligations concerning employees suspected of carrying out the fraud, statutory duties imposed on directors of the company and reputation management issues.

See our related article: COVID-19 Fraud: An Emerging Risk For Companies

With estimates last year suggesting that between 5 and 10 per cent of the £39 billion paid under the Government’s job retention scheme has been claimed fraudulently, the prediction is that this is just the start of HMRC’s activity in this area. Hence COVID-19 related fraud is likely to take on an increasingly prominent role in law enforcement activities over the coming months and, most likely, years. So with this in mind, it is essential that businesses across all sectors have robust measures in place to prevent, identify and report fraud, and that when fraud is suspected appropriate action is taken. Ignoring the issues or turning a blind eye not only has serious ramifications for the business, but also for its directors, officers, senior managers and owners.

further information

For further information on the issues raised in this blog post, please contact a member of our serious fraud team.

 

about the authors

Nicola Finnerty is a Partner in the Criminal Litigation team and is a leading criminal defence expert in both business and general crime. She has experience of fraud, corruption  (including the Bribery Act) and cartel matters, financial compliance, money laundering, asset seizure and confiscation cases, through to sexual offence cases, drugs, murder and offensive weapon crimes. Nicola has acted for many high profile individuals who have needed advice on criminal matters. She has also represented corporate clients, financial institutions and professional firms in investigations and proceedings brought by the SFO, CPS, FCA, HMRC and other prosecuting bodies. She is routinely instructed in judicial review and appeal cases.

Will Hayes is a Associate (Barrister) in the Criminal Litigation team and represents individuals and corporate clients in a range of criminal cases. He has represented clients in cases covering the full spectrum of general crime, cases with an international dimension and represents clients defending extradition requests and challenging Interpol Red Notices. Will has a particular interest in legal professional privilege (LPP) and has developed a comprehensive understanding of the law and its practical application.

 

 

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