Furlough: fraud, penalties and arrests


Furlough fraud can occur when an employer claims an amount they are not entitled to receive, or continues to claim when circumstances have changed, for example an employee leaves their employment.


Employers can rectify any errors by notifying HMRC within 90days. Companies have until 12 months from when their accounting period ends to make the repayments, while sole traders or partners have until the 31 January 2022.


Failure to report fraudulent furlough claims, can incur penalties such as an income tax charge on the full overclaimed amounts, together with a penalty charge of up to 100% of the amount claimed.


If a company becomes insolvent, its officers can be personally liable for the tax charge, if they knew of the overclaimed grant.


In addition, claiming furlough grants to which you are not entitled to amounts to fraud. There have already been reports of nine people being arrested in the West Midlands in relation to a suspected £495,000 fraudulent claim, while a company director and their accountant were arrested in September over a suspected £70,000 fraud.


https://www.gov.uk/government/publications/penalties-for-not-telling-hmrc-about-coronavirus-job-retention-scheme-grant-overpayments-ccfs48



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