Siobhain Egan, Director (non exec) of Lewis Nedas Law writes:
As one would expect when considering the panic as a result of the Covid 19 lockdown, and the scale of the Government's financial support measures for businesses and the self-employed alike, genuine mistakes and deliberate fraud will have occurred.
HMRC and the other investigative authorities (including the NCA and the SFO) will have had these issues within their sights, and enforcement action will be supported by the relevant provisions of the pending FINANCE ACT 2020, due to be made law in July 2020 (draft leglislation was published and out for consultation on 29/5/2020).
These are the major financial support schemes that will attract the attention of HMRC and the other enforcement authorities, largely because of the number of complaints which they have received concerning allegations of abuse of these schemes:
- Coronavirus Job Retention scheme - the furlough scheme ( CJRS )
- Bounce back loan ( BBLS )
- Coronavirus Business Interruption Loan ( CBILS )
- Self -Employment Income Support Scheme ( SEISS)
WHAT SHOULD YOU DO, IF YOU SUSPECT EITHER A GENUINE MISTAKE OR COVID 19 FRAUD HAS OCCURRED?
- check your compliance schemes alongside the very clear criteria that Government has attached to each of the schemes.If you have sufficiently robust Compliance schemes, then you should be aware by now if any mistakes have been made or fraud has occurred.
- call in your accountants to confirm either of the above. Many self-employed Individuals and businesses instructed their accountants to administer these various grants or loans. If you suspect that your accountants have made mistakes, then think about instructing independent forensic accountants to investigate. This will also depend upon the size of your business and the amount of money involved.
- Be prepared to return the monies ASAP. The Finance Act 2020 will allow a possible moratorium of 90 days within which to return the monies completely. This period will run from the day that either you or your company has been made aware of the issue or within 90 days of the passing of the legislation.
Please note that at the time of writing (10/7/2020) the 2020 Act is not yet in force, and amendments maybe made to its provisions as it passes through Parliament.
It maybe that your business, in this economic downturn, is not in a position to repay all the monies due. In that case you will have to open negotiations with HMRC about a repayment schedule.This may involve interest and penalties which can be very onerous and expensive.
The 2020 Act will most certainly give HMRC the power to check all furlough payments. They will be allowed to reclaim any overclaimed or mis-spent monies through enhanced tax assessments or financial penalty. There will be a financial penalty if HMRC are not notified within the 90 day moratorium and if there has been any abuse of the scheme - the civil financial penalty will be 100% of the amount not spent on furloughed employees costs.
- Take legal advice to ensure that you have been completely accurate in terms of the amount of money that has to be repaid, that you have assistance when negotiating with HMRC and to show that the issue arose because of a genuine mistake rather than a deliberate fraud.
- Be aware that HMRC will go after company directors , and hold then jointly and severally liable not just where fraud has been alleged but also where an accidental and genuine mistake has been made .Even Company directors of an insolvent company will be personally liable.
You and your company must be prepared to show a complete and clear audit trail of the monies received under any of the aforementioned schemes and what happened to those monies.
Our view is that HMRC will be lenient in those cases where a company has self reported a mistake as far as these monies are concerned, however in the event of deliberate and high level fraud ,then their Fraud Investigation Service (FIS) will become involved. We suspect that any fraud of £100,000 will attract the attention of the FIS.
The FIS generally prosecute relatively few criminal cases , and when they do it’s either because of consistent egregious fraud or a matter of policy. The CPS prosecute their investigations, and they announced, soon after the Covid 19 lockdown was enforced, that they would prioritise such Prosecutions.
Even if HMRC accept that there has been a genuine mistake , you and your business will have come to their attention, so expect regular and intense scrutiny from them in the future.
CRIMINAL INVESTIGATIONS AND COVID 19 FRAUD IN THE UK
We have referred earlier to the work of the FIS, HMRC are lobbying for a specific criminal offence to deal with Covid 19 payment fraud and consequential sentences of up to 10 years imprisonment, a limitless fine or both, in the event of a conviction for making a false representation to them with the intention of a payment under the Covid 19 job retention scheme.
There have been hundreds of reports of abuse made to HMRCs whistleblowing hotline, and the CEO of HMRC recently informed MPs that nearly 2/3 of those reports demonstrated genuine abuse and fraud.
HMRC can also resort to prosecuting offences of cheating the public Revenue's 106A Taxes Management Act 1970, tax evasion or simply making false representations to them. Each of these offences carry substantial custodial sentences.
It just won’t be the HMRC investigating Covid 19 related fraud , the SFO and NCA have both expressed intent to investigate and prosecute these cases .The SFO have a minimum entry level of the value of the fraud at £1 million , the NCA focus upon the activities of organised crime groups, and have recently prosecuted a number of People in relation to fraud and money laundering charges concerning the acquisition and provision of PPE.
HOW CAN WE AT LEWIS NEDAS LAW HELP YOU WITH COVID 19 FRAUD AND HMRC INVESTIGATIONS DEFENCE?
To begin with we have a specialist HMRC defence team of leading, and recognised lawyers who have decades of successful experience when dealing with HMRC investigations, both civil (Code of Practice 9) and criminal investigations /prosecutions. We have acted for both individuals, company directors and companies ( of all sizes ) across most sectors. We can guide you through negotiations with HMRC, working with top specialist barristers and independent forensic and specialist HMRC investigation accountants , to assist you with a prompt resolution to any of the above issues. We pride ourselves on the fact that as far as fee levels are concerned we charge mid market rates but offer a first class and highly rated professional service comparable with any City law practice.