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October 2020 Tax Investigation Round Up

October's round up of the latest tax investigation news and cases:

  • HMRC's CJRS letters cause alarm among employers
  • Suspected £70,000 furlough fraud leads to two arrests
  • 18-year ban issued to event directors

HMRC's CJRS letters cause alarm among employers

Last month we shared a report about the first batch of coronavirus job retention scheme letters HMRC were sending to employers where they believe incorrect furlough claims may have taken place. This is believed to be the first in a series of such letters to be issued to employers throughout the UK.

With these first letters now in the hands of recipients, there has been some confusion and alarm caused due to the failure of the letters to specify precisely why HMRC suspect the employer's CJRS claim to be inaccurate, with no information about the suspected error, the amount, or the month in which it is believed to have occurred.

HMRC have already stated that they are not looking to chase and investigate employers who may have made innocent mistakes on their claims due to the complexity of the process, but rather go after those employers who are thought to have deliberately over-claimed, and in so doing, committed furlough fraud.

Where an over-claim has taken place, employers are able to make a self-correction within the specificed time frame to avoid any further action by HMRC or any penalties that might otherwise be imposed.

It is understood that the letters are requesting employers to contact HMRC directly to resolve the matter, and as such, Gilbert Tax is advising any individuals who have received such a letter the speak with a qualified tax investigation specialist in the first instance, before entering into any correspondence with HMRC.

Despite the confusion that is being caused by the letters, as of 2nd October 2020, UK firms are believed to have already voluntarily paid back as much as £215 million in cash claimed through the furlough scheme. The funds have been received by HMRC from 80,433 employers.

Suspected £70,000 furlough fraud leads to two arrests

Fraud investigation officers from the HMRC were sent to residential addresses in the Walthamstow and Romford areas of London whereby a woman and a man were arrested. During this arrest, business records, paperwork and digital devices were seized to gain insight into the furlough fraud from the government's coronavirus job retention scheme (CJRS). This case is currently undergoing investigation.

Jim Harra, HMRC CEO told MPs that up to £3.5bn in furlough payments may have been claimed due to fraudulence or error. Giving evidence to the public accounts committee, he believed that between 5% and 10% of furlough payments could be incorrect. Over 8,000 calls have been received to the HMRC's fraud telephone hotline and they are now looking into 27,000 high risk cases in which it is believed an employer has made a serious error.

Terry Braithwaite, Fraud Investigation Service from the HMRC, said: ‘The CJRS is part of the collective national effort to protect jobs. While most employers have used the scheme responsibly, this is taxpayers’ money and HMRC will not hesitate to act on reports of abuse of the scheme.’

The furlough scheme began in March, offering up to 80% of an employee’s pay to a maximum of £2,500 per month.  It is now being decreased, with employers expected to pay an increasing proportion of the monthly grant from August, and is set to finish at the end of this month.

If a business has overclaimed a CJRS grant and have not repaid it, they must notify HMRC by the latest of these three dates or risk paying a penalty:

  • 90 days after the date they received the grant you were not entitled to;
  • 90 days after the date they received the grant that they were no longer entitled to keep because their circumstances changed; or
  • 20 October 2020

Gilbert Tax is able to assist clients with correcting incorrect CJRS claims, making disclosures to HMRC, and dealing with HMRC investigations in a professional and efficient manner. You can speak with a furlough fraud tax expert today by contacting our team.

18-year ban issued to even directors

Charlies Sludden and wife Karen Sludden were directors of a promotions and events marketing company 'KLB Promotions and Events Ltd,' based in Gateshead. Clients would typically use them within retail stores or at exhibitions.

However in August 2019 the Sludden's company entered into voluntary liquidation. An investigation took place after discovering irregularities in its tax returns between May 2010 and February 2017. During this investigation, 16 incorrect tax returns were uncovered that had been made to the tax authorities.

Due to the incorrect tax returns, the tax authorities had made repayments totaling more than £146,000 to KLB Promotions and Events. This money was used inappropriately on personal and family expenses by the Sluddens and both husband and wife have been disqualified for a nine year period.

Chief investigator for the Insolvency Service, Rob Clarke, said: ‘Charles and Karen Sludden embroiled themselves in a deliberate and protracted policy of making false tax claims, generating repayments to secure income for personal and family expenses.

‘Directors have a firm duty to ensure they deal properly with their company’s tax affairs. Charles and Karen Sludden have paid the price for failing to do this and have been removed from the corporate arena for a substantial amount of time, reflecting the severity of their actions.’

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