As Covid restrictions ease, the UK government is shifting its focus from dealing with the crisis to managing the fall-out from it. One big area of attention is Covid fraud, with a new government task force planned to address this issue.
In the first year of the pandemic, the government brought out numerous financial packages to support businesses, including the Coronavirus Business Interruption Loan Scheme (“CBILS”), Bounce Back Loans (“BBL”), Eat Out To Help Out, Coronavirus Job Retention Scheme (“CJRS”), Self-employment Income Support Scheme (“SEISS”), Business Rates Relief and the Recovery Loan Scheme.
While the schemes were welcome news for businesses, the speed with which they had to be deployed caused problems. Banks, financial institutions, and the government didn’t have the time for full assessments of eligibility, and the rules weren’t always clear to those applying.
The government now believes that some of the financial assistance was obtained via fraudulent applications - whether by fake businesses or by businesses intentionally or unintentionally applying the rules incorrectly.
In March 2021, a new HMRC Covid Fraud task force was announced, with plans to tackle the estimated £3.5billion of fraudulent CJRS and SEISS claims in the UK.
What are the types of fraud?
Some of the business fraud examples are relatively clear-cut, such as where claims were made for clearly ineligible or fake businesses. But the methods and types are wide and varied.
For example, it’s estimated by the Department for Business, Energy and Industrial Strategy and the British Business Bank that organised criminals and other fraudsters, along with those who will default, mean that 35-60% of BBLs might never be repaid.
Another support scheme that was targeted by fraudsters is the CJRS, for which claims were made for employees who either didn’t exist or didn’t meet the requirements of the scheme. HMRC estimate that 5-10% of cash - amounting to more than £3.5billion - was wrongly awarded, which it hopes to recover during its furlough fraud investigation.
Fraud around the Eat Out to Help Out scheme involved fraudulent misrepresentation - setting up fake restaurants, fake customers, and/or shifting the dates of payments for meals so that they would be eligible.
Of course, many businesses could find themselves in the eye of the fraud investigation team for genuine mistakes.
The government has built in some time to allow for those businesses to correct this. For the CJRS, for example, if you’re found to have incorrectly claimed and you don’t tell the government within 90 days, you’ll have to pay back the money plus an additional 100% on top for furlough fraud penalties.
That’s bad enough, but if you fail to do so and you’re therefore deemed to have committed intentional Covid fraud, the penalties could be much more significant, including potential prison time. Six people were arrested in November for false claims related to the Eat Out to Help Out scheme, for example. As part of a Bounce Back Loan investigation, in January, after work by government fraud investigators, three men were arrested for a suspected £6 million fraud relating to BBLs.
It’s not worth taking risks with your business. If you’re concerned that there may be errors in your claims, or if you are currently undergoing a fraud investigation, Gerald Edelman can help.
We have extensive experience with forensic accounting, and can often resolve these issues before any serious penalties are incurred. We can also provide expert witness services in court.
Contact us to speak to one of our forensic experts who can talk through your concerns in confidence and provide advisory or independent expert witness services in connection with any legal dispute, financial crime, loss quantification or valuation.