Furlough Fraud

This is a blog about businesses that took this attitude

The Treasury’s coronavirus job retention scheme (CJRS), known to most as the ‘Furlough scheme’, was closed on 30th September, after 18 months of handing out billions in financial support for businesses.

It is only now however, that those businesses who fraudulently took advantage of the scheme while their employees carried on working are starting to be named and shamed. BBC Radio Four’s ‘File on 4’ recently exposed three rogue organisations that blatantly exploited the furlough scheme during the pandemic.

Businesses that fraudulently cashed in were revealed in the programme of using threatening techniques to suppress any whistleblowers to HMRC and telling workers that they are “100% still at work” and that the company would be “daft not to take” the money. The programme was released on the same day HMRC announced that collect wrongly claimed CJRS payments could be recovered from directors’ personal assets.

Furlough Fraud: A bit like the Wild West

File on 4 first focused on Kash Khokhar, the owner of the digital marketing agency Kau Media Group, who wrongly claimed furlough money and used intimidation and threats of redundancy to keep employees quiet. Using secret recordings obtained by whistleblowers, the documentary revealed how Khokhar told his employees over a Zoom call at the start of the pandemic, that they were being furloughed.

Khokhar then told his workers to continue working “because we still have campaigns live”. One employee, Nick Muncey, a web designer, was told by Khokhar that he was going to be working with a 20% reduced salary but didn’t mention furlough. Shortly after an email circulated stating that he had agreed to go on furlough.

Muncey immediately responded to the email saying that he actually agreed to a reduced salary, but Khokhar replied that he was justified keeping his employees working whilst on furlough due to “moving into a period of time that’s bit like the Wild West” where “anything kind of goes”.

The programme estimated that Khokhar had claimed around £100,000 in furlough payments and had, at the same time, unbelievably also struck a deal to bulk buy PPE gowns and masks from China and sold these to the UK government for £40m at a huge profit margin.

Furlough Fraud:  ‘loophole’

File on 4 also uncovered similar furlough fraud at Brewster Partners, with Its CEO Nigel Brewster being caught on a recording saying: “It’s a government grant, you’re absolutely daft if you don’t take it”, and that “we’ll bring in around £140,000 in furlough money”. His wife Lisa, the managing partner, was also recorded telling furloughed staff that the morning company Zoom calls will still go ahead as a “loophole” in the furlough rules means “if you choose to work, we can’t stop you” and “So I’m presuming everybody here will be working”.

She went on to describe the support as “a thing to get some cash because every other business is doing it” and reiterated to the employees: “We’re still 100% at work……We’re all doing it, not for the money but because we want to and for our mental health situation.”

Furlough Fraud: Fake NI numbers

The final case involved a group of companies all registered to the same virtual mailbox service in London that raked in around £26m from the furlough scheme. Orchestrated by Indian national Rajanish Garibe, the scheme used phantom employees with fake national insurance numbers to claim furlough support for more than 2,000 employees. Garibe did all this without even stepping foot in the UK and was able to carry out the fraud by using fake IP addresses and completing government forms on Gov.uk.

Furlough Fraud: Directors cannot evade responsibility

In a clear sign that HMRC is ramping up its Covid fraud defence, they have said that they will recover wrongly claimed Covid support payments and will target those that see insolvency as a way of avoiding tax due on Covid support payments. They’ve achieved this by making directors have a ‘joint and several liability’.

HMRC said: “We will pursue all individuals for the amount owed, taking debt recovery action, if necessary, against whichever of them has sufficient assets to pay. It does not matter who pays or how much each individual pays as long as the amount is paid in full”.

Other Covid Fraud

Furlough is not the only Covid support which has been exploited by criminals. The scale of Bounce Back Loan fraud has been significant, with official estimates putting the total in the billions. When HMRC chief executive Jim Harra appeared in front of the Public Accounts Committee in September last year, he confirmed that up to £3.5bn in deliberate fraud or error could have been paid out through the furlough scheme alone.

But as the File on 4 report suggests, that number has since ballooned. Law firm BLM has recently revealed that from 1st April to 30th June 2021, there was an increase in HMRC investigations of potential misuse of SEISS, CJRS and the Eat Out To Help Out scheme of over 30%. Overall, coronavirus fraud is estimated to have cost the Treasury £6bn thusfar.

File on 4 reported that HMRC’s fraud hotline has received 30,000 calls, but that only 13 people have been arrested so far. Janet Alexander, the head of HMRC’s taxpayer protection taskforce, told File on 4: “We’ve blocked so far over £300m worth of claims going out to people where we suspect it’s under criminal attack.”

Accountant’s view

Despite Janet Alexander’s mealy-mouthed words, HMRC’s efforts thusfar have been totally inadequate and there is no doubt that their almost totally abandonment of normal checks before handing out shed loads of money, has cost this country billions, which we all will be paying for, for decades to come.