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On 9 July 2020, HM Revenue and Customs (“HMRC”) announced that it had made its first arrest for fraud relating to the Coronavirus Job Retention Scheme (“CJRS”). A business owner from the West Midlands was arrested on suspicion of “cheating the public revenue, fraud by false presentation, VAT evasion and money laundering”, totalling £495,000.

The arrest demonstrates HMRC’s commitment to the investigation of potentially fraudulent claims under the CJRS. In this article, we focus on what this means for businesses in light of the wider offence of the failure to prevent the facilitation of tax evasion, under the Criminal Finances Act 2017. 

An Overview: The Coronavirus Job Retention Scheme 2020
The CJRS is one of the government’s measures to help businesses and individuals during the coronavirus pandemic. The first version of the scheme ran from March until 30 June 2020 and provided employers with access to a government grant to cover up to 80% of their employees’ wages (capped at £2,500 per month) who were not working but remained on payroll (known as being "on furlough"). The second scheme, which runs until 31 October 2020, allows employers to bring furloughed employees back to work, whilst claiming the CJRS grant for the “usual” hours they do not work. Since its release, as of 2 August, over £33 billion has been claimed through the scheme, subsidising the wages of over 9 million employees at over 1 million UK companies. 

As of 22 July, it is understood that HMRC had received 6,749 reports of fraudulent claims (furlough fraud) under the CJRS. The complexities of claiming under the scheme, combined with the range of factors for businesses to consider when making a claim, mean that even those who have sought to remain within the guidelines may have inadvertently over-claimed.

The first arrest for fraudulent use of the CJRS should therefore not come as a surprise; HMRC is actively investigating both fraudulent and negligent activities in order to reclaim wrongful payments, and it should be expected that further enforcement action will follow.