Measures include a £100m investment in a specialist taskforce to tackle fraud across all Covid-19 support packages, and a further expansion in the recruitment of fraud investigators to increase the ability of HM Revenue & Customs (HMRC) to target non-compliance through illicit financial flows.
The Taxpayer Protection Taskforce will receive 1,265 HMRC staff to combat fraud within Covid-19 support packages, including furlough and self-employment support scheme, representing one of the largest responses to a fraud risk by HMRC.
"Because several HMRC directorates are engaged in Covid-19 support schemes the composition of the taskforce is no doubt being worked through but, by way of example, the last time HMRC put 1,000 staff into criminal enforcement was a decade ago and that generated a fivefold increase in prosecutions in under five years," said Andrew Sackey, a tax fraud expert at Pinsent Masons, the law firm behind Out-Law and former head of HMRC’s offshore, corporate and wealthy compliance unit.
"The creation of this massive Covid fraud taskforce is a marked shift away from previous more conciliatory lines in HMRC nudge letters which urged firms and individuals to come forward voluntarily, acknowledging that 'mistakes happen'. It is a clear message that the government is dedicated to ensuring the hundreds of billions of pounds it has spent on Covid support does not end up in the hands of fraudsters," he said.
"It is 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. Even if head office thinks the rules have been complied with, what has actually happened on the ground may be very different. Those who find themselves in breach of the rules, for whatever reason, should seek expert advice about how best to put the record straight and repay sums they were not entitled to as soon as possible," Sackey said.
A wide range of measures are likely to be deployed to ensure that the right taxpayers pay the right amount of tax at the right time, Sackey said, but this new task force will be looking to specifically address the more serious abuses of the ongoing Covid relief schemes.
Sackey said: "Where HMRC uncovers deliberate action, one of the factors which leads to HMRC taking criminal, rather than civil, action is where a deterrent is needed. In the current climate, it is likely that the government will want to see HMRC using its criminal powers as a deterrent to systematic abuses of Covid schemes."
It was also announced in the budget that the government will invest a further £180m in 2021-22 in additional resources and new technology for HMRC, forecast to bring in over £1.6bn of additional tax revenues between now and 2025-26. One of the aims of this investment was expressed to be to "recruit additional compliance staff to increase [HMRC's] ability to target non-compliance through illicit financial flows".
"This investment in illicit finance seems to have gone largely unnoticed, but it will likely amount to hundreds of additional specialist fraud investigation staff who will bolster the department's economic crime strategy and underpin the increasing use of specialist powers such as account freezing orders which have reportedly been used in support of the early furlough dawn raid activity; and so these various compliance measures clearly build towards a common ambition," Sackey said.
"HMRC has an excellent track record of successfully converting extra investment into protecting additional tax revenue providing a good return on investment for the Treasury thanks, in part, to HMRC's increasingly strategic and blended use of their most serious criminal and civil investigations powers," he said.
In the 2010 spending review and 2015 summer budget HMRC's enforcement arm also received very significant investment. It has increased the amount of tax income its criminal enforcement directorates brought in or protected by 33-fold in a decade, from about £150m in 2009/10 to over £5bn in 2019/20.