U.K. Employers Cheating Virus Furlough Plan Face Prosecution

(Bloomberg) --

U.K. employers who try to cheat the government’s program to pay furloughed workers during the coronavirus crisis face prosecution, the country’s top tax official said.

Under the job-retention program announced last month, the government will pay 80% of employee wages so long as they remain tied to their jobs during the economic lockdown designed to slow the spread of the disease. A condition of the payments is that no work is done for employers, although training is permitted.

“Some employees have already been reporting that some employers have asked them to work during the furlough period,” Jim Harra, chief executive officer of Her Majesty’s Revenue and Customs, told a panel of lawmakers by video conference on Wednesday. “If it amounted to trying to defraud us, we could take criminal action.”

The furlough plan is among an unprecedented package of measures announced by Chancellor of the Exchequer Rishi Sunak to protect the economy and ensure people remain employed when social distancing rules are relaxed. In all, he’s pledged more than 60 billion pounds ($74 billion) of direct aid and offered 330 billion pounds of loan guarantees to help workers and businesses.

No Comfort

IT systems to process claims from businesses for the furlough plan will open on April 20, with the first payments going out within 4 to 6 working days, Harra said. Software has been tested up to a volume of 450,000 claims per hour and so should be able to cope with “the very large volume of claims that we expect to receive.”

Businesses can backdate their claims to March 1, and employees must be furloughed for a minimum of three weeks to qualify. But Harra offered little solace to those who started new jobs in March and have been calling to be included, saying there were no plans to widen the program beyond those who were on payroll as of Feb. 28.

“What we have to do here is get a scheme set up very, very rapidly and time really has been the enemy of perfection in this,” he told the House of Commons Treasury Committee. “Normally I think if we were going to be asked to set up something of this scale we would probably have taken a year or two.”

Cerys McDonald, who is coordinating the coronavirus programs at HMRC, said she would expect the number of people starting new jobs after the cutoff date to be “in the low hundreds of thousands.”

Organized Crime

Harra also said the tax authority is live to the risks associated with setting up the program so quickly.

“We are going to be paying out a vast sum of money in a very rapid period of time,” he said. “Any scheme like this is a target for organized crime.”

Harra also said that under a tax deferral program, HMRC already allowed 3.8 billion pounds of tax to be deferred between March 11 and April 1. He said he expected a program allowing companies to defer value added tax until next year to be worth 30 billion pounds to them, and another one allowing income tax payers who self-declare their earnings to be worth 13 billion pounds.

©2020 Bloomberg L.P.

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