"It's a billion pound furlough fraud" - the real cost of the abuse of Covid support by fraudsters as they pocked cash for phantom workers and non-existent companies

"It's a billion pound furlough fraud" - the real cost of the abuse of Covid support by fraudsters as they pocked cash for phantom workers and non-existent companies

A staggering £67.4 billion pounds has been spent by the Government on the furlough scheme since the outbreak of the Covid-19 crisis. Although many of those payments have helped keep legitimate businesses afloat there has been widespread fraud and abuse according to ICSM.

The firm’s boss Ian Carrotte said the industry credit circle has heard scores of stories from its members about companies fraudulently claiming furlough for ‘ghost’ workers. He said: “It was a scheme rushed out at the start of the pandemic but there were not enough checks on those applying. Now the chickens have come home to roost as the Government is rushing through new legislation – far too late in my opinion – to go after the rogue companies and their directors. By this autumn the bill will be close to £100bn. Working on only one percent being suspect, then it's a billion pound fraud.”

The taxman has announced it is investigating an increasing number of reports of allegedly fraudulent claims. With furloughed staff taking home up to 80% of their wages from the government, with an upper limit of £2,500 a month it is no surprise some people have been tempted to set up fake firms just to get the cash and claim for non existent workers. Then there are those who claim the payments but still force their staff to work or simply inflating their staff salaries to get the maximum pay outs but not paying the worker the amount claimed.

A study by Oxford, Cambridge and Zurich Universities  found that the ban on working while furloughed was ignored, with 63% of furloughed employees (around six million) breaking the rules. The study also found that a fifth of furloughed employees were instructed to carry on working by their employer.

Last year HMRC began investigating fraudulent firms with the first one they brought to book having claimed almost half a million pounds in furlough payments.

 The ways in which has been abused includes:

  • making a claim for a furloughed employee, but insisting that the employee carry on working;
  • making a claim for 'phantom' employees, that is, dismissed employees or employees who have been 'newly recruited';
  • claiming for employees who are not in fact furloughed, either because the employee has been required to work or the employee is unaware that a claim in relation to his employment has been made; and
  • inflating a claim (e.g. misrepresenting the number of worked hours to maximise the size of the claim)

About ICSM Credit

ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com

For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk

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