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14,000 workers report employers for committing furlough fraud

furlough office work pandemic employers
furlough office work pandemic employers

Some 14,000 workers have blown the whistle on their employers for committing “furlough fraud” as the taxman cracks down on unjust pandemic payments.

More than a million businesses used taxpayer funds to stay afloat via the Coronavirus Job Retention Scheme, better known as furlough, taking a total of £70bn. However, the system was vulnerable to fictitious claims given the speed at which it was set up and how quickly payments were made to struggling businesses.

To claw back lost funds, HM Revenue & Customs set up a reporting system encouraging employees who know of furlough fraud to report their managers. Some 13,775 have used the system so far, according to a Freedom of Information request, submitted by law firm Pinsent Masons.

The firm said some companies took furlough payments even while their staff continued to work while other fraudsters made claims for non-existent “ghost” employees, then pocketed the cash.

Arun Chauhan, of the Fraud Advisory Panel, a charity, said the high number of whistleblower reports suggested workers had “woken up” to the true impact of fraud.

He said: “Employees who were forced to work under duress have moved jobs, they’re safe now, but are seeing how much taxpayer money is needed right now and are looking back and thinking: ‘what happened to me in the pandemic – that wasn’t right’.”

A spokesman for HMRC said whistleblower reports were not a reliable gauge of how many companies claimed money fraudulently – as some of the reports may be untrue and others may be from multiple people accusing the same companies.

However, it estimates that of the £70bn given out as part of the two-year scheme, approximately £3.46bn was lost to fraud and error.

In one case, a fraudster in India conned the taxpayer out of £27.4m in furlough payments over 14 months, despite never having been to the UK, by setting up fake companies in London.

Beverley Sunderland, of Crossland Employment Solicitors, the number of reports showed how much time and resource HMRC had dedicated to investigating furlough fraud. The taxman has already recovered £26.5m of this through a forfeiture order in October 2021.

However, she said small instances of furlough fraud would likely go unpunished. She added: “Some of these claims are small and my one concern is: will HMRC really have the resources to investigate them? I’m not sure.”

She said her firm received a deluge of calls at the beginning of the pandemic from "furloughed" staff who had been told by their employer to keep working or they would be fired.

“We came across one company who claimed payments and then cut staff pay by 20pc – so effectively they were getting free labour,” she said.

The furlough scheme ran from April 2020 to September 2021. In its initial stage, the scheme paid employers so they could fund 80pc of employees’ salaries, up to £30,000.