Iskander FernandezPartner at law firmBLMThis article discusses the role of HMRC in leading more than 12,000 interventions to support UK government Covid schemes.

BLM’s research into coronavirus-related fiscal supports schemes revealed that HMRC had performed over 12,000 interventions at the end of Q1 2021 in relation to the Coronavirus Job Retention Scheme, the Self-Employment Income Support Schemes (SEISS), and Eat Out to Help Out Schemes (EOHO). These schemes may have been fraudulently accessed during the pandemic, according to ongoing interventions.

Following a Freedom of Information request, HMRC provided information about the number of compliance interventions related to errors and fraudulent risks for each of these schemes. The HMRC conducts compliance investigations in order to recover or protect funds that have been lost to the UK due to fraud, tax evasion, and non-compliance. CJRS had 7384, SEISS was close behind (5,020), and EOHO (424) had 424.

HMRC also revealed that five people had been arrested for CJRS offenses and three were being held in relation to EOHO. HMRC could not confirm the number of current prosecutions in relation to these schemes.

HMRC reported in June that nearly PS18 billion had been paid out so far under CJRS, and PS24.5 billion was paid out under SEISS. EOHO claimed that PS849 million would cover 160 million meals over the 28 days it had been active. These three schemes together total more than PS43 billion.

It is likely that the number of interventions will increase as more fraud and errors are discovered in investigations into possible misuse of these programs. HMRC responded to the FOI request by clarifying that its intervention data only included cases where the coronavirus scheme was the primary offense. However, it is likely to have cases outside of these cases, where fraud or other violations are minor aspects. HMRC could be required to intervene in fraud and errors much sooner than the initial figures indicate.

As with all schemes that provide fiscal support, there will be loopholes that could be exploited fraudulently. It is easy to see that there should have been more diligence in screening applicants. However, given the magnitude of the pandemic and the uncertainty that the country was experiencing, it is not surprising that loopholes were created that can be fraudulently exploited. Fraudsters may have taken advantage of the situation to make their own money.

It is reasonable to assume that fraud losses totaling billions of dollars are possible when we take into consideration the other recovery programs aimed at businesses, such as the Coronavirus Business Interruption Loan Program (CBILS) and Bounce Back Loans. It takes HMRC time to build a case so it is unlikely we will see an immediate surge in arrests or prosecutions. It’s more a matter of when than if because there are thousands of interventions currently underway.

While some interventions may be accidental, the Treasury’s decision not to invest PS100m in a coronavirus fraud taskforce demonstrates that the government is determined to stop any misuse of these programs. However, it is not clear if this funding will be enough to address the fraud level or what the composition of the specialist taskforce will be. Is it going to be pooled with existing resources, creating an imbalance in other team members, or will there be a recruitment drive from HMRC?

If charges are brought against you, and the proceedings are commenced, all of the sentencing powers available by a court to address any relevant persons will be in effect. Due to the nature of fraud, sentences can range from financial penalties and custodial sentences. A court could also ask for the proceeds of crime from these offenses to be recouped. This could lead to Confiscation Orders being issued against wrongdoers.