HMRC launches over 12,000 probes into Covid scheme fraud

HMRC revealed that as of 28 March 2021, five individuals had been arrested in relation to CJRS, and three in relation to EOHO

HM Revenue and Customs (HMRC) has carried out over 12,000 interventions relating to the Coronavirus Job Retention Scheme (CJRS), the Self-Employment Income Support Scheme (SEISS) and Eat Out to Help Out Scheme (EOHO), according to research by law firm BLM.

HMRC provided information on the number of formal compliance interventions relating to error and fraudulent risks for each of the schemes, following a Freedom of Information (FOI) request.

Compliance interventions are an investigation carried out by the HMRC, with an interest to protect or recover funds lost to the UK through fraud, tax avoidance, evasion and non-compliance. The CJRS had the highest number (7,384), SEISS followed closely (5,020) whilst EOHO (424) had the fewest.

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In addition, HMRC revealed that as of 28 March 2021, five individuals had been arrested in relation to CJRS, and three in relation to EOHO. The HMRC was unable to confirm the current number of prosecutions relating to the schemes.

In June, HMRC reported that almost £18bn has so far been paid out under CJRS and £24.5bn has been paid out under SEISS. Under EOHO, £849m was claimed to cover 160 million meals across the 28 days it was active. It totals over £43bn across these three schemes alone.

The firm said as investigations into potential misuse of these schemes unfold, it is expected the number of interventions will continue to rise, as further errors and fraudulent behaviours are uncovered.

In its response to the FOI request, HMRC clarified that its data on interventions represented cases where the primary offence related to a coronavirus scheme, but it will likely have other cases outside of these schemes where coronavirus matters, whether fraud or other infringements form a minor aspect of the case.

This means the quantity of errors and fraudulent behaviour requiring intervention by HMRC “may already be much higher” than the figures suggest.

Iskander Fernandez, partner and specialist white collar crime and investigations lawyer at BLM, said: “As is the case with any scheme where fiscal support is provided, loopholes will emerge that can be fraudulently exploited.

“In hindsight, it is easy to say that more should have been done by way of due diligence on each applicant but given the scale of the pandemic and all the uncertainty the nation was gripped with, it is hardly surprising that gaps emerged. Some fraudsters will have taken full advantage of the situation to line their own pockets.”

He added: “Furthermore, when taking the various other recovery schemes aimed at businesses into account, such as the Bounce Back Loans (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS), it is not unreasonable to suggest that we are talking about losses in the billions through fraudulent activity. As it takes time for HMRC to build a case, it’s unlikely that we’ll see an immediate wave of arrests and prosecutions. However, it’s a case of when, rather than if, given that thousands of interventions are currently underway.”

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