HM Revenue and Customs should have done better to reduce the likelihood of funds being unlawfully reported under its coronavirus work support systems, according to the National Audit Office, after estimating that more than GBP 3 billion could have been obtained through fraud and misconduct. The Coronavirus Work Retention Scheme and the Self-Employment Income Support Plan set up to secure workers and help people whose earnings had been affected during coronavirus disease outbreak are suspected to have been “major amounts of fraudulent activities,” the NAO said in its recent report.

It also claimed that the degree to which the HMRC and the Treasury could minimize fraudulent practices would be a “primary value-for-money measure” for the initiatives.

Last month, HMRC permanent secretary Jim Harra said the tax department was prosecuting scammers, having claimed that between 5% and 10% of the requests may have been false statements or mistakes. According to the estimates of the HMRC, the level missing by 20 September is between GBP 2 billion and 3.9 billion, according to the NAO. Although the figure could grow higher as the overall investment on the two-work support program is expected to hit almost £70 billion by the end of this month, the NAO added.

The report concluded that there was abundant proof that managers had falsely demanded furlough money for workers who worked, and those bogus businesses had reported compensation.

HMRC’s abuse hotline obtained more than 10,000 complaints, half of them involving cases where workers worked while being technically on furlough; and, in a study of NAO workers, 9 percent confessed to operating while furloughed at the behest of their bosses against the rules of the system.

The research also showed that workers would only be informed that their boss had claimed furlough compensation for them if they had been notified specifically by the company. There could therefore be situations where workers have been ignorant that they should never have been employed under lockout, it has been reported.

HMRC should have done better to guarantee that staff understood they were on the furlough plan and thus could not have served, the NAO added. To reduce this damage in the future, HMRC aims to publish in September the identities of workers requesting financial assistance under the latest Work Support System proposed by the Chancellor, Rishi Sunak. It would also explicitly alert the individuals whose companies have claimed the funds.

The report has urged the tax office to step up its research and determine just how much revenue has been diverted to misleading and erroneous statements. It should also guarantee that civil servants have adequate means to retrieve overpayments and irregular compensation on both policies “where it is cost-effective to provide it,” the study concluded.

HMRC Permanent Secretary Jim Harra said last month that HMRC is concentrating its attention on fighting violence and theft under the work assistance program by targeting 27,000 “high-risk” offenses. But the NAO said that HMRC’s strategy predictions – which included a theft and mistake level of 1-2 percent on the self-employed assistance scheme – were “inevitably based on speculation instead of evidence-based conclusions”

“HMRC is improving its awareness of the full extent of corruption and mistake and expects that workers will need to be redeployed from tax enforcement jobs to resolve crime and accident in the programs,” he said. However, it reported that the HMRC does not plan to provide a full estimate of the overall fraudulent activities to be resolved “at the earliest” by the end of 2021. So far, only £10m in work retention allegations have been prevented.

The NAO confirmed that the policies have so far been “highly effective” in saving employment. They helped at least 12.2 million individuals, with about 30 percent of the UK population at the height of the first coronavirus spike in May. Yet it also showed that as many as 2.9 million individuals were unavailable for assistance under CJRS and SEISS, and encouraged the Treasury and HMRC to guarantee that fewer people will skip any future program.

The study outlined situations where individuals were found unavailable for assistance after being economically impaired by a coronavirus, either because of political actions or because the HMRC lacks the evidence required to defend against corruption. They involved 1.1 million individuals calculated by private entities to be disqualified for furlough ‘because the HMRC has insufficient evidence to confirm representations or assess qualification,’ the study said.

Another 1.6 million individuals did not fulfill the standards for the self-employed assistance scheme, either because much of their wages certainly didn’t come from self-employed jobs or because their trade earnings surpassed £50,000. Another 200,000 people may have missed their assistance because they were freshly self-employed in 2019-20 and haven’t yet requested a self-assessment profit.

“The NAO advises that HM Treasury and HMRC explore how to guarantee that accurate statistics, including as many users as possible, will be used to assess qualification so that fewer people with income losses will be disqualified from similar programs in the potential,” the NAO added.

NAO Head Gareth Davies says: “: “HM Treasury and HMRC have accomplished their goal of accelerated execution of the projects, and the civil service should be praised for making them available on time. Clear signs are that the program has managed to protect employment in the near term, but it is still evident that many more workers have lost their income and have not been able to obtain funding.

“It seems that the extent of theft and mistake may be substantial, especially concerning the furlough system. HMRC should have done better to make it known to staff that their boss was part of the furlough program. In the coming years, agencies should do better when job service systems are in place to safeguard workers and combat theft.”

The government representative stated “: “The government’s focus from the onset of the pandemic has been to protect jobs as well as deliver help to those that need it as soon as practicable, and our welfare support program has offered lifelines to millions of hard-working households around the UK.

“Our policies have been structured to mitigate deception from the start and we have refused or prohibited hundreds of false applications. We will not support those who attempt to defraud taxes and act quickly toward criminals, including felony convictions.”

Catherine Pearson