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Retailers warned - it's post-pandemic pay back time
Retailers are being urgently encouraged to forensically review their payroll processes after the government announced plans to recover up to £1bn of COVID support wrongly claimed by businesses through a specialised anti-fraud taskforce.
Official figures have estimated £5.8bn has been lost to fraud through its schemes to support businesses during the pandemic, including the Coronavirus Jobs Retention Scheme (furlough), the Self-Employment Income Support initiative and the Eat Out to Help Out programme aimed at the hospitality sector.
In its critical report published in the last week of February, Parliament’s Public Accounts Committee (PAC) said: “HMRC’s unambitious plans” for recovering a total of £6 billion it estimates it spent incorrectly in COVID-19 support payments – whether through fraud or mistakes - could lead to government writing off at least £4 billion of taxpayers’ money".
This, the PAC warns, “risks rewarding the unscrupulous and sending a message that HMRC is soft on fraud”.
Dame Meg Hillier MP, Chair of the Public Accounts Committee, said: “The level of fraud and error in furlough that employers will get away with is a real concern. What signal does it send when HMRC rolls over on billions of pounds of fraud and error directly related to COVID support packages? With the current parlous state of the public finances, we can ill-afford to be so cavalier over so much taxpayers’ money.
Every taxpayers’ pound lost to a fraudster will lead to honest ordinary people feeling the post-pandemic pinch harder and harder,” she added.
HMRC said £500m of wrongly claimed support has already been recovered, and another £350m has been returned without the intervention of HMRC.
HMRC has now said it plans to reclaim between £800m and £1bn of COVID support money lost to fraud by 2023 through a new Taxpayer Protection Taskforce, which consists of 1,265 HMRC employees and into which the government has invested £100m.
Retailers are now utilising their risk and Loss Prevention teams to review payroll processes, and in some instances using civil recovery measures to reclaim overpayments.
Solicitor Nermina Webster from Business Loss Prevention Ltd, a specialist civil recovery provider said: “We are receiving a lot of enquiries about furlough overpayments and how we can help to recover these. Furlough was set up very quickly at the start of the pandemic and its implementation was based upon a very complicated formula, with the rules changing quite quickly, so unsurprisingly a lot of money has been paid out in error.”
‘’We would strongly advise all businesses to audit their payroll processes and procedures. There may have been employees that returned back to work but that were still receiving furlough payments, or those who had actually left work but continued to receive furlough pay or they were only entitled to partial furlough but administrative errors meant that the employee was paid full time furlough in addition to their normal pay.’’
“Many loss prevention professionals are now auditing payroll to make sure that payments have not been made in error. They are being proactive, so that they can inform HMRC what they have found – which may be nothing and that everything is in order – or, where discrepancies have been found, what the business are going to do about it - such as repaying the HMRC and recovering their losses directly from the employees paid in error. Experience has shown that the longer it is left to inform HMRC of your findings, the more likely it is that that HMRC will argue that the business should have acted sooner, which then opens that business up to possible additional HMRC fines and penalties.’’
‘’This is why businesses need to act quickly to review and reconcile all the payments that have been made.’’
‘’We are now seeing an increased number of civil claims coming through from retailers who have proactively repaid money back to HMRC - including National Insurance and PAYE. HMRC rightly wants its money back and as such it will be down to individual businesses to reclaim the money owed and this is where Business Loss Prevention Ltd can add real value, especially if the money has already been spent and repayment plans need to be compliantly assessed, agreed and monitored through to full repayment.’’
For more information, visit www.business-loss-prevention.co.uk or contact Nermina directly at nermina.webster@business-loss-prevention.co.uk
