Thousands more self-employed under investigation for coronavirus fraud: HMRC data reveals 27% jump in investigations in 3 months

  • HMRC spent £16m to date investigating into suspected fraudulent misuse of schemes
  • As of 30 June 2021, HMRC opened nearly 15,000 investigations into potential misuse of furlough, Eat Out to Help Out and Self-Employment Income Support Scheme
  • Between 1 April and 30 June 2021:
    • of SEISS investigations rose 27%
    • of EOHO investigations rose 36%
    • of CJRS investigations rose 3.6%

 November 2021 – Research by law firm BLM into potential misuse of coronavirus fiscal support schemes has revealed that by the close of June 2021, HM Revenues & Customers (HMRC) has launched nearly 15,000 investigations into the Coronavirus Job Retention Scheme (CJRS), the Self-Employment Income Support Scheme (SEISS) and Eat Out to Help Out Scheme (EOHO). These interventions may well uncover the extent that these schemes were fraudulently accessed during the pandemic.

A freedom of information act submitted to HMRC assessed the number of compliance interventions launched by the body, in an attempt to protect or recover funds lost via fraudulent misuse of COVID-19 support schemes. It showed that SEISS investigations in particular have risen rapidly since 1 April this year by 27%, with 1,367 new interventions launched, bringing the total to 6,351. Interventions into potential CJRS misuse are now at 7,632 since the pandemic began, with 584 launched into EOHO access.

Furthermore, there have been a further two arrests relating to CJRS and EOHO since 1 April 2021, bringing the total to five for each scheme. A first arrest is yet to be made in relation to the SEISS scheme.

In September, HMRC confirmed that £1.3 billion has been repaid under CJRS since July 2020, with £300m paid back over the past three months alone, as the number of people on furlough declined to its lowest level since the start of the pandemic. HMRC also confirmed it has redeployed 360 caseworkers to investigate COVID-19 support scheme compliance cases since August 2020, at an estimated cost to the HMRC of £16m. The body confirmed that the Taxpayer Protection Taskforce, the Government’s commitment of £100m to hire 1,265 HMRC staff to investigate COVID-19 fraudsters, will be in place for 2021/22 through to 2022/23.

Analysing the findings, Julian Cox, partner and Head of Employment, London, at BLM, said: “Whilst there’s been a lot of conversation about furlough fraud in recent months, these figures show that with the HMRC’s COVID-19 interventions in full swing, the SEISS has been a thriving ground for potential misuse of public funds. Self-employed individuals and members of a partnership tend to have a less uniform structure in their business compared to larger organisations. It could well take HMRC longer to spot instances where the person in question has accessed funds fraudulently, hence why we’re seeing a sudden rise in interventions now.

“Given the short amount of time these extensive support schemes were assembled and launched in, and the complicated processes and criteria required to access them, some individuals and businesses will have made honest mistakes in their applications. However, there’s no doubt that others will have knowingly taken advantage.

“Though we don’t currently know how many of these interventions actually bear out, we are now seeing the first round of arrests and prosecutions commence. There’s real risk here that the Government could lose out on millions – if not billions - due to fraudulent activity, and the investigations into this. With £16m spent by HMRC so far, and a further £100m earmarked,  it is going to be vital that the government works quickly to distinguish the skulduggery from the genuine mistake.

“Given the increased investigative activity, it’s clear that self-employed, small business owners and larger organisations alike need to ensure that if they’ve accessed these schemes, they have done so properly. Anyone caught in the midst of an intervention will need to seek thorough advice, as it will prove decisive in handling any legal action taken by HMRC.”

 

About the research 

Research by BLM into the various coronavirus-related fiscal support schemes revealed that as of 23 August 2021, HMRC had carried out the following number of interventions, arrests and prosecutions related to the Coronavirus Job Retention Scheme (CJRS), the Self-Employment Income Support Scheme (SEISS) and the Eat Out to Help Out Scheme (EOHO):

Total no. of interventions and arrests up to 30 June 2021

Scheme 

Compliance Interventions 

Arrests 

CJRS 

7,632 

SEISS 

6,351 

EOHO 

584 

5

 

No. interventions 1 April 2021 – 30 June 2021

Scheme 

Compliance Interventions 

Arrests 

CJRS 

182

2

SEISS 

1,367

EOHO 

159

2

 

For context, “compliance interventions” includes both error and fraudulent risks and the data represents cases where the primary offence relates to a coronavirus scheme. The HMRC have conceded there will likely be more cases where coronavirus matters, whether fraud or other infringements, form a minor aspect of a case.

 

*Data was acquired via a Freedom of Information (FOI) request, with HMRC sharing the data 23 August 2021.

Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of BLM. Specialist legal advice should always be sought in any particular case.

Who to contact

Julian
Cox

Partner , London

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