Common Allegations of Furlough Abuse
HMRC categorises furlough error and fraud according to the level of intent, which determines whether it pursues a civil or criminal resolution. Common allegations include: working while furloughed (asking or coercing staff to continue working while claiming their wages from the state); ghost employees (claiming for individuals never employed or who had left before the scheme began); inflated claims (deliberately overstating salary or hours to increase the grant); and non-payment to staff (receiving the grant but failing to pass the full amount to employees).
The 20-Year Investigation Window
Standard HMRC enquiries are subject to relatively short limitation periods. However, where HMRC suspects deliberate inaccuracy, it can investigate tax and grant matters going back up to 20 years. Furlough fraud is categorised as a form of tax fraud, meaning the extended window applies even to claims made during the initial period of the scheme.
Innocent Mistakes and the Reasonable Excuse Defence
The CJRS rules changed frequently and were not always straightforward to apply. HMRC acknowledges that some inaccurate claims resulted from genuine error. Where a business can demonstrate that it took reasonable care or had a reasonable excuse for any inaccuracy, it may be possible to negotiate a civil settlement. Early voluntary disclosure, before HMRC commences a formal enquiry, is treated more favourably than disclosure made after an investigation has begun.
Criminal Charges
Where HMRC concludes that abuse was deliberate, it will refer the matter to its criminal investigation teams. Potential charges include Cheating the Public Revenue, Fraud by False Representation under the Fraud Act 2006, and Money Laundering under POCA 2002. Convictions in this area have led to custodial sentences, director disqualification, and confiscation orders.
What to Do if You Are Under Investigation
If you have received a CJRS compliance enquiry, been asked to attend a voluntary interview, or are under criminal investigation in connection with furlough claims, seek specialist legal advice immediately. Do not speak to HMRC investigators without a solicitor present. An early review of your furlough records — before HMRC completes its own analysis — allows any vulnerabilities to be identified and addressed proactively.