Are your furloughed staff breaking the rules and doing some work for you from time to time? This issue is back in the news following the Spring Budget when it become clear the government is putting furlough fraud at the top of its agenda. Earlier this month on 3 March the Chancellor Rishi Sunak delivered his Budget and one of his announcements was a new 'Taxpayer Protection Taskforce' to combat fraud within Covid-19 support packages. It means the issue of overclaiming furlough monies is most definitely on the Revenue's radar and is an issue employers need to be alive to. With everything else going on, and all the other announcements, the issue hasn't been as widely covered in the media as you might expect, although The Independent did see it coming. They gave details how the government will deploy a team of more than 1,250 Revenue officials to investigate and prosecute people who have unlawfully claimed cash under schemes designed to help businesses and workers weather the pandemic, and businesses which have overclaimed.
Under the Furlough Scheme employers have been able to claim up to 80% of employees' salaries up to a limit of £2,500 per employee. Employers can only claim where employees have not worked or provided a 'service to' their employer whilst furloughed. However, increasingly employers are discovering that, despite having instructed employees not to work during furlough periods some have ignored that instruction. It means well-meaning staff have created a serious corporate compliance issue for their employer which could result in financial penalties and reputational damage - the Revenue has a 'name and shame' list it makes public. The Chancellor's announcement marks a significant shift in strategy by the government. They've moved from conciliatory nudge letters acknowledging that 'mistakes happen' to full scale funding of the Fraud Investigation Service which only take on case where dishonesty is suspected. This is clearly a big issue and one we have been flagging with clients. Anne Sammon and fraud litigator Andrew Sackey have written about this in their briefing note 'Furlough overclaims and essential next steps for employers'. So what are those steps exactly? Let's find out. I spoke to Anne who joined me by video-link to discuss it:
Anne Sammon: “I think the first thing is to establish whether or not your employees were working during the furlough periods. We've seen a number of instances where employers have done all the right things at the time of putting employees on furlough, so very clearly communicating that employee shouldn't be doing any work, and employees disregarding that. That's sometimes for well-intentioned reasons because they want to try and improve their employer's economic prospects and therefore they've disregarded the instruction not to work, but the first thing that you need to do as an employer is establish whether you've got any employees who might have been working during furlough because that will affect the any claims that you've made to government for the Coronavirus Job Retention Scheme grant. So that's step one. Step two is if you if you identify that you've got any employees in that bucket, you probably want to go and take some advice in terms of what amounts you need to be repaying to HMRC."
Joe Glavina: "The rules talk about providing 'a service' – that's working – but how do you judge what counts as work? You'll have staff sitting at home but responding to emails, joining Zoom calls and so on. That'll be a mixed bag in many cases?
Anne Sammon: "So the way that we've seen many organisations do this is to kind of effectively do email searches. So to run searches over the mailboxes of those employees who were furloughed to look at, first of all, the volume of emails that are being sent. It's not unusual for employees to use their work emails for personal reasons and you might expect, you know, one or two emails that are kind of connected to 'staying in touch' with the workplace, which is allowed under the furlough scheme. I think what tends to trigger a greater sense of need to investigate more thoroughly is where you see larger volumes of emails being sent by people who weren't supposed to be working. In that situation you're then looking at analysing to see what's the content of those emails. So again, I can think of a couple of examples where we've seen people getting multiple emails from online shopping services, they're clearly not connected with work, and once you start doing your due diligence you can identify those. But equally we've seen other issues where employees have been emailing one another about work-type queries and that those the ones that trip you into the need to investigate a bit more seriously and work out whether or not the employees have been working. I think the other thing that's important here is a lot of the cases that we've seen have been triggered by whistleblowing. So an employee coming forward and saying, I know I wasn't supposed to work during that period but, actually, my manager asked me to do some things and because it was my manager I did it and I'm now reflecting that maybe that wasn't the right thing for me to have done. So that whistleblowing piece is really important and making sure that the employees have a channel to blow the whistle in that situation, and also that those concerns are properly escalated and investigated."
Joe Glavina: "Last question Anne. In your paper you talk about 'forensic review tools' to help gain better insight on potential exposure. What's that about?
Anne Sammon: "So one of the capabilities that we have Pinsent Masons is that we have a forensic accounting team who are real specialists in this area who can take the data that an employer has and analyse that data to work out whether or not there are things in there, from a furlough perspective, that are of concern. So whether we've got employees who are sending large numbers of emails to a particular person, or whether the subject heading is something that looks like it's related to work. So we can help with that analysis of whether there is a big problem here or is this actually an innocent explanation? Even doing the due diligence and making sure that there's an innocent explanation, at least gives you a paper trail if HMRC ever come and raise a concern about something that you've claimed on the furlough scheme that you have actually considered, and investigated, and that you've reached your own conclusion. think the worst case scenario is if HMRC comes to you and says, you know, we've had an independent whistleblower who has contacted us through our whistleblowing hotline and said that that you have overclaimed through the furlough scheme and an employer who says, 'oh, you know, we haven't ever checked that ' that's going to be a red flag immediately.”
That paper which Anne has written with tax and fraud-litigation specialist Andrew Sackey is called 'Furlough overclaims and essential next steps for employers' and we have put a link to it in the transcript of this programme.
- Link to guidance by Anne Sammon and Andrew Sackey on furlough overclaiming essential next steps for employers