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September 9, 2021updated 20 Sep 2021 11:38am

Flood of fraud enquires expected as furlough ends

By Joe Pickard

Mid-market businesses should prepare for a ‘flood’ of letters from HMRC as the UK furlough scheme comes to a close, according to Grant Thornton UK.

A survey carried out earlier this year for Grant Thornton of 605 mid-market businesses found that, of those surveyed who had made use of the scheme, just under a fifth (16%) had not reviewed their initial Coronavirus Job Retention Scheme (CJRS) claims to check they were correct.

Over one million UK businesses have used the CJRS during the pandemic. It has safeguarded more than 11.6m jobs at a cost of just under £70bn, according to recent figures.

The CJRS legislation indicates that any inaccuracy can be treated as deliberate and concealed. This is in contrast to penalties in most other tax regimes, whereby investigators will usually only judge something as deliberate in the face of compelling evidence.

Grant Thornton partner and former tax inspector David Francis explains the Code of Practice 9 (COP9) letter which some business owners will receive this autumn: “HMRC has been embattled on two fronts: supporting businesses to deal with both Brexit and the pandemic. It’s fair to say the department’s put that ahead of enforcement activity due to a lack resource. But that stance is set to change as it comes under pressure to recoup a suspected £7billion fraudulently, or erroneously, claimed under the CJRS.

“Come September, we’re expecting a number of businesses will be opening a letter inviting them to enter a Contractual Disclosure Facility (CDF) under COP9. This lets the recipient know they’re suspected of deliberate fraud and offers them protection from criminal prosecution; on the proviso they come completely clean, disclose any tax errors over the last two decades, and repay the amount owed.”

He added: There’s a misconception that HMRC isn’t interested in smaller and mid-sized businesses. But we’ve seen instances where CJRS claims for one single employee have been investigated. Businesses may have made honest mistakes during the incredibly challenging trading conditions posed by the pandemic. But HMRC’s view is likely to be that there will have been at least three instances to get things right: the initial claim, replying to the nudge reminder letters it has sent out, and again when completing a corporate tax return.

“Receiving a COP9 letter can be a stressful event. It’s important to enlist the right professional advice and respond within the 60-day deadline.”

 

 

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