Are you quite sure you're not inadvertently claiming furlough monies? Would you even know? Do you have the due diligence procedures in place to check that crucial issue? This is back in the news because this is now focus of HMRC's investigation team.
In the Budget on 3 March Rishi Sunak announced how the government is investing £100m in a specialist taskforce to tackle fraud. The Taxpayer Protection Taskforce will be getting over 1,000 HMRC staff to combat fraud within Covid-19 support packages, including furlough, and it represents one of the largest responses to a fraud risk by HMRC we have ever seen.
This is something we flagged shortly after the Budget in our programme ‘Furlough overclaiming? Check and repay’. Anne Sammon advised on the steps employers can take to minimise the risk of wrongly claiming furlough monies for employees who are actually working, something they are not allowed to do under the rules. We are coming back to this to hear from the former Regional Head of Criminal Investigation at the Revenue. This is Andrew Sackey, a tax and fraud litigation lawyer at Pinsent Masons, who has been flagging this issue in Outlaw. He says the creation of the taskforce is a marked shift away from the previous conciliatory approach and ‘nudge letters’ from HMRC to a more hard-nosed approach. His message is that it is now more important than ever that employers undertake reasonable due diligence to ensure that they and their staff have complied with the rules of the furlough scheme. So let’s hear more about that. I phoned Andrew and asked him about the Revenue’s current approach to this:
Andrew Sackey: “Well I think the first thing to say is that furlough in all its guises has been an absolutely massive undertaking. At its height, over 1.2 million businesses were supported by it so there's a huge number of moving parts involved and when people engaged with furlough they had to comply with a variety of rules and they've complied, or they appear to have complied, with the core rule that you can't work whilst furloughed, pretty well, and people understand what that means and what that looks like. But there was another requirement, and that was you can't provide a service to your employer and that is a little bit more nebulous because that could include responding to emails, arranging meetings with people who are not furloughed, or doing other sort of promotional activities. The issue there is that if staff are doing this, even though they are well intentioned and well meaning, they are actually storing up a big compliance issue for their employers because it's not why they were working, it's the fact that they are working, and because so many people are working remotely the centre don't necessarily have visibility of what's going on and so the issue around due diligence is, certainly in terms of how it's expressed by HMRC, a growing acknowledgement that they anticipate that employers will be doing due diligence to make sure that their claims are properly formed and that means checking, to one extent or another, that your staff not only weren't working, but they also weren't providing a service to the employer. So the concept of due diligence, and you have to be mindful of course of data, privacy, etcetera, but it's a concept of checking, for example, whether your furloughed staff have been transmitting or receiving volumes of emails, and you don't need to look into, necessarily, the content of the emails because they may be personal, of course, they may be in respect of well-being, but you need to understand what the subject matter is. So there are different types of searches that you could format to begin to give you a first indicator either that everything is good, or that there might be some problems that you might need to look at a little bit more closely. So that's the sort of thinking behind due diligence.”
Anne Sammon and Andrew Sackey have together written a paper for employers called 'Furlough overclaims and essential next steps’ which is currently on the Outlaw website. In that paper they talk about using 'forensic review tools' to help gain better insight on potential exposure as part of the due diligence that Andrew was talking about. So let’s hear more about that from Anne who joined me by video-link:
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 by Anne Sammon and Andrew Sackey is called 'Furlough overclaims and essential next steps’ and can be accessed from the Outlaw website. We have put a link to that in the transcript of this programme.
- Link to guidance by Anne Sammon and Andrew Sackey on furlough overclaiming