The UK tax authority has launched almost 13,000 investigations into use of the government’s coronavirus business support schemes, including for possible fraud and other breaches of rules.
BLM, the law firm which uncovered the data on the HM Revenue & Customs probes as part of a freedom of information request, said the number of investigations could rise sharply in coming years.
The data relate to so-called compliance interventions by HMRC relating to use of the government’s furlough programme, the self employment income support scheme, and the “eat out to help out” meal subsidy measure.
These interventions are investigations carried out by HMRC to protect or recover funds lost to fraud, tax avoidance and evasion, and non-compliance with other rules.
The 12,828 interventions by HMRC cover the period up to the end of March. At 7,384, the largest number of interventions relate to the furlough scheme. The self-employed programme accounts for 5,020 of the investigations, while “eat out to help out” makes up 424.
HMRC had received 28,444 reports of potential furlough fraud by the start of this month, according to separate data obtained by the Financial Times. Not all of these are expected to lead to investigations.
HMRC has criminal investigatory powers, similar to other UK law enforcement agencies, including the ability to make arrests.
Eight individuals have been arrested as a result of investigations into fraudulent misuse of the coronavirus business support schemes so far.
The 12,828 investigations by HMRC represent only a fraction of the more than 1m businesses that have used the furlough scheme, which has covered about £64bn worth of company workers’ wages during the Covid-19 pandemic.
HMRC has said previously that it expects to recover about £1bn of fraudulently or mistakenly claimed furlough money over the next two years.
Iskander Fernández, partner and specialist white-collar crime and investigations lawyer at BLM, said: “As it takes time for HMRC to build a case, it’s unlikely that we’ll see an immediate wave of arrests and prosecutions. However, it’s a case of when, rather than if, given that thousands of interventions are currently under way.”
HMRC said: “We are taking tough action to tackle fraudulent behaviour. We have now opened more than 12,000 inquiries into claimants we suspect may have kept more than they were entitled to. We have also begun a handful of criminal investigations.”
The tax authority has about 1,250 staff based in its taxpayer protection task force to help deal with fraud and errors relating to Covid-19 business support schemes.
In his March Budget, chancellor Rishi Sunak promised that £100m would be invested in the task force.
HMRC staff are looking at a number of ways to identify furlough fraud, which can be difficult to uncover.
For example, staff scrutinise debit and credit card payments received by businesses to identify the scale of trading activity taking place and compare this to furlough claims. They can show that a business may have had staff working while claiming they were furloughed.
HMRC staff have found that in some instances, businesses recorded more sales than they did in pre-pandemic times despite furloughing all their staff.
One restaurant business claimed maximum furlough payments despite turning into a takeaway during lockdowns and signing up for the “eat out to help out” scheme.
HMRC also cross-references claims made to different coronavirus business support schemes to identify fraudsters.