Employers across York and North Yorkshire are being urged to check their use of the furlough scheme amid growing evidence of fraud.

Regulatory lawyers warn that company bosses face heavy fines and possible prison sentences if they are found to have committed fraud by breaching the strict rules of the Coronavirus Job Retention Scheme (CRJS).

As the CJRS starts to wind down ahead of its closure at the end of October, some reports suggest that more than 60 per cent of furloughed employees have spent time working for their employer in breach of the CJRS rules.

It is also reported that more than 4,000 furlough fraud cases have been reported to HMRC by employees themselves.

Jeremy Scott, head of regulatory at York law firm Lupton Fawcett, said: “HMRC is under pressure to recoup some of the huge sums paid under the CJRS. It has indicated it is not trying to catch employers out, which suggests inadvertent breaches of the scheme rules are not a priority.

“However, employers should audit their use of the scheme to identify any mistakes made and address them proactively.”

The Government believes it may have paid out up to £3.5 billion in wrong or fraudulent claims for the furlough scheme.

Jim Harra, the top civil servant at HMRC, said that his staff believe between five per cent and 10 per cent of furlough cash might have gone to the wrong places.

He was speaking in front of MPs on the Public Accounts Committee.

The Government has so far paid out £35.4 billion in furlough cash, according to the latest figures.

It means that somewhere between £1.75 billion and £3.5 billion could have been paid out wrongly.

“That will range from deliberate fraud through to error,” he added.

“What we have said in our risk assessment is we are not going to set out to try to find employers who have made legitimate mistakes in compiling their claims, because this is obviously something new that everybody had to get to grips with in a very difficult time.

“Although we will expect employers to check their claims and repay any excess amount, but what we will be focusing on is tackling abuse and fraud.”

It is the first time HMRC has spoken publicly about the level of potential fraud that could have been committed as part of the scheme, which covered up to 80 per cent of an employee’s salary while they were on furlough. 

Furlough is expected to end next month, however businesses who bring staff back from furlough will receive another £1,000 if the employee is still in work by the end of January.

Jeremy Scott, of Lupton Fawcett, said that abuse of the CJRS, and therefore potential offences of fraud, include employers:

• furloughing staff but asking them to work still;

• registering staff as furloughed, but not telling them and claiming the CJRS grant;

• claiming the grant for ‘ghost’ employees (made up names or former workers);

• using the furlough grant for something other than business purposes.

Jeremy added: “If found guilty of furlough fraud, employers could face prosecutions, huge fines, criminal records and prison time for directors. This is not to mention the reputational damage to businesses found guilty of fraud.”

Lupton Fawcett’s employment team, and its regulatory and corporate defence team, have combined to provide specialist advice and support covering all aspects of furlough and furlough fraud.