More than £5.5bn of taxpayer money from the government’s coronavirus assistance schemes including furlough, self-employed support and “eat out to help out” was paid out to fraudsters or given out incorrectly.
It emerged on Thursday that £5.2bn paid out by the government under the coronavirus job retention scheme, widely known as furlough, ended up in the hands of fraudsters or was paid in error.
HM Revenue and Customs acknowledged in its annual report that about 8.7% of the £60bn it paid out under the furlough scheme in the 2020-21 tax year ended up in the hands of organised crime gangs, fraudsters or was awarded erroneously.
The furlough scheme paid 80% of the wages of up to 11.5 million workers placed on leave since March 2020, up to a maximum of £2,500 a month.
A further £490m was lost to fraudulent or incorrect claims under the Self-Employment Income Support Scheme, while the figure was £70m for the “eat out to help out” scheme set up to encourage people to go back to restaurants last summer.
An HMRC spokesperson said the schemes were created quickly to support people in dire need, and had been subsequently strengthened to crack down on fraud.
“The Covid support schemes have helped millions of people and businesses through the pandemic, and the government was clear that the priority was getting money to those who need it as fast as possible,” the spokesperson said.
“The Taxpayer Protection Taskforce is expected to recover £1bn from fraudulent or incorrect payments over the next two years, and work is already under way, with 23,000 ongoing investigations.”
HMRC said it had so far stopped or recovered £840m of over-claimed grants in 2020/21.
Its annual report highlighted an unnamed company where “staff had been threatened with the sack if they didn’t continue working despite being furloughed, even if sick”. Tax investigators recovered £357,000 from the firm.
In another instance, a restaurant with “one eligible employee – the director” claimed the maximum £2,500 a month for several “off-the-book employees”. At the same time the restaurant claimed to be closed it signed up for support under the “eat out to help out” scheme.
Steven Porter, a partner at law firm Pinsent Masons, said: “It is now clear that HMRC’s Covid support schemes presented an opportunity for many fraudsters. While clearly necessary to support the economy during the pandemic and a vital lifeline for many, they have also proven too easy for criminals to exploit.
“HMRC will now be hunting down those who made fraudulent claims, particularly through the Fraud Investigation Service. There will be a wave of civil and criminal penalties, including prison sentences.”