Record keeping to support Government assistance against COVID-19

In Spring 2020 the Government started to bring in various measures to assist both the individuals and businesses with the impact of COVID-19.

For businesses this included bank finance through Bounce Back Loans and CBILS, and to support employees for which there was no work, the Furlough scheme (through the CJRS).  For the pub and restaurant industry there was also the Eat Out scheme last August.  The Government will need to establish how much has been made available, or will be due, to work out how this is going to be repaid – and for how many future generations!

We have heard many stories in the press since Summer 2020 on how fraudsters have applied online for bank funding, for example bounce back loans. The banks are now sifting the various honoured applications to verify to whom they loaned money, and very soon will be expecting to see the first repayments to give them evidence of their exposure, and ultimately our Government’s.

There have already been many versions of the Job Retention Scheme applicable to UK employers. The basis was to reimburse employers for up to a maximum amount of a members salary where they were unable to work in the business, but the devil was in the detail, although that did get amended as time went on. In essence the employer could not make a claim if that employee was seen to be generating income for the employer. Current estimates are that around £65 billion will have been paid for furlough before the end of April 2021 with the Public Accounts Committee estimating ‘optimistic fraud’ could account for between 7% and 34%

HMRC acted quickly to arrest people suspected making £70,000 worth of wrongful claims.  HMRC also opened up a furlough hotline – the Public Accounts Committee (PAC) reported last month that more than 20,000 tip-offs had been received, with 5,000 cases being enquired into by HMRC.  Research published at the end of 2020 suggested as many as two-thirds of employees could be working, despite being placed on furlough.  Indeed the HMRC Chief Executive told the PAC that while the scheme had saved 9 million jobs, it was a ‘magnet for fraudsters’.

MP’s have called for a list of employers who have made furlough claims to be disclosed to the general public.

Absence of staff is hitting us all, including HMRC. It is currently reckoned the level of enquiries being made by HMRC to be about three quarters of a ‘usual’ year. Whilst HMRC had approval to new powers of enquiry for such COVID-19 measures, we are now seeing an increase in enquiries on claims made for the Eat Out scheme, and also on Furlough. For those convicted of furlough fraud, penalties can be severe, including refunding grants, unlimited fines and even prison sentences.

For the majority, however, there may be the odd mistakes, or the claim is fully correct. HMRC will expect a proper reply to their enquiries to collaborate the evidence. For those clients who have subscribed to our Firm’s Tax Investigation Service, we can assist in replying to HMRC, with no additional fees being charged. Other employers may already have this cover through their business insurance. If not, clients of Kreston Reeves can join our Tax Investigation Service, and if this is before that original HMRC enquiry letter then they can also benefit from that peace of mind this service offers.

You can find out more here, or speak with your usual Kreston Reeves contact for further information.