What Should I Do During A Furlough Investigation?

by | Mar 21, 2023

Since the end of the Covid pandemic, more and more businesses are finding themselves under investigation over their furlough payments.

According to HMRC estimates, between £3.2 billion and £6.4bn in funding was given to businesses under false pretences, showing widescale abuse of the scheme.

Even if you legally claimed furlough support, you might be subject to an HMRC investigation. Don’t panic, though. If you’ve done everything by the book, you have nothing to fear.

While it may feel stressful, there are steps you can take to ensure everything goes smoothly.

Here’s what you can do if HMRC plans to investigate your business over your furlough payments.

What is furlough fraud?

Furlough fraud can fall under three main categories in the eyes of HMRC:

  • error – when a business legitimately claims but makes genuine mistakes in calculations
  • opportunistic – legitimate but inflated claims
  • organised crime – false claims.

Some examples of fraudulent claims include:

  • employers placing staff on furlough but getting them to work as normal
  • misrepresenting working hours
  • employers claiming for non-existing employees.

Understandably, there’s room for error when claiming furlough support. If you’ve made a genuine mistake and can demonstrate that to HMRC, you’ll likely only have to repay any of the extra balance rather than incur a fine.

HMRC guidance says that you must declare any discovery of overpayment within 90 days of receiving the support.

If you’ve realised an overpayment past the 90-day window, you’ll need to get in touch with HMRC as soon as possible or ask us to contact them on your behalf.

If you are due to undergo an investigation, you’ll receive a “letter of concern” from HMRC informing you of their intention to analyse your claim.

What do I do if I receive a letter from HMRC?

As we stress, if you receive a letter and are confident that you’ve legitimately claimed the support, don’t panic.

That said, you need to act fast. It can be overwhelming to hear that your business is under scrutiny. So, if you believe everything is above board, or you’re unsure whether you can afford your repayments, get in touch with us.

By acting as soon as possible, you’ll be able to show HMRC that you’re taking responsibility for any errors and that the mistakes are unintentional. Communication is key.

What if I have fraudulently claimed?

Due to the volume of suspected fraud, HMRC set up a dedicated task force to investigate businesses nationwide. Currently, there are expectations of 30,000 potential cases, which the Government is following up.

If you’ve overclaimed on purpose and haven’t told HMRC, you’ll face a penalty. When deciding on the penalty, the Revenue will take into account:

  • when you receive the payment
  • when it became payable or chargeable to tax.

If you knew you weren’t entitled to your grant and didn’t inform HMRC in the notification period, you’ll be seen as deliberately concealing it from the Government. If this is the case, you’ll incur a penalty of up to 100% of the grant.

While we don’t condone these actions, your best chance is to get in touch with us to go through the process.

What can I do in the meantime?

First things first – as with all of your tax reporting, you’ll need to ensure everything is up-to-date and accurate.

Even if you haven’t received a letter, HMRC has a 6-year window to investigate your furlough claims. This is why it’s incredibly important to have a clear record of your payments, both from HMRC and to your staff.

If you have any doubt whatsoever, you should get in touch with your accountant. They’ll be able to go through your records and prepare in case HMRC does open an investigation.

We’re here to help

Having your business under investigation is a stressful process, especially for furlough payments you made over two years ago. While mistakes can easily happen, you should always prepare for any eventuality.

We’re experts in dealing with HMRC and know the ins and outs of the furlough scheme, so we’re perfectly placed to help you through any investigation (should it happen).

Get in touch to discuss our tax investigation insurance service.

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