£26.5M Fake Furlough Claims

Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.

While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.

HRMC has issued an order to seize £26.5m worth of cash allegedly obtained fraudulently through the furlough scheme from ‘non-existent’ businesses run.

HMRC was granted a forfeiture order over five Nationwide building society accounts. A Forfeiture order is granted when a court is satisfied that the funds in an account represent the proceeds of crime or are intended for illegal use.

The accounts were all owned and controlled by Ranjanish Garibe, 44, who used the four different companies to access furlough funds.

HMRC told the court that Garibe had allegedly invented seven employees, when the furlough scheme was introduced, and then used different national insurance numbers which were either ‘fake or stolen’ to claim the money. 

The four companies claimed to be an IT services company, a charity, a research hospital, and a religious institute according to the company’s registration documents.

The companies were all registered at a virtual office address in East London.

The companies each received between £5m and 10m in furlough cash in May, according to government data. In each of the prior six months, the companies had either made no claims or claims no greater than £250,000. None of the companies made claims in June.

Is Fraud Pandemic?

Fraud has increased due to many factors including individual or corporate economic difficulties, the increased opportunity for fraud arising from changing and remote working practices and the increase of online banking, retail and other business activity. In addition, Covid response schemes have inadvertently created unprecedented opportunities for fraud.

The Treasury has launched a remarkable 23,000 inquiries into potentially fraudulent payments made during the pandemic. Last year, HMRC announced that it was investigating 27,000 cases of possible fraud relating to the furlough scheme alone.

In February 2021, the government announced the creation of a £100m taxpayer protection task force, with 1,265 dedicated staff working within HMRC to detect fraud. This year, HMRC has confirmed that it opened more than 12,000 investigations into fraud and error relating to the Coronavirus Job Retention Scheme (CJRS), Self-Employment Income Support Scheme and Eat Out to Help Out Scheme before the end of March 2021. 

One of those concerned four companies in question understood to have received between £20m and £40m in May 2021 from the UK government’s Coronavirus Job Retention Scheme despite having only been registered to a virtual mailbox service in London.

There have been a series of arrests in relation to bounce back loans taken under false pretences: it is anticipated that between 35% and 60% of these will remain unpaid due to fraud and credit issues.

HMRC has estimated that 5-10 % (or up to £7bn) of furlough payments were claimed fraudulently.

Fraud is not limited to Covid support measures. The Public Accounts Committee has reported that that fraud and error within Universal Credit rose by £3.8bn to an all-time high of £5.5bn between April 2020 and March 2021. 

Then there are the frauds committed on individuals and businesses by way of vishing, phishing or smishing, whereby a fraudster tricks a person into divulging information enabling the fraudster to make a payment from the victim’s account, or a fraudster inserts themself between the victim and the intended recipient of a payment. In addition there are phone and text scams or using online search engines and social media adverts, to trick victims tricked into wrongly thinking he or she is making a genuine investment with anticipated high returns.

As far as the Covid support schemes are concerned it is likely to take years for the enforcement agencies to catch up with fraudsters and those who wrongly claimed or overclaimed, but in the end they have plenty of time to go back and check claims. As regards other frauds it is up to all of us to stay diligent and check any suspicious activity before divulging personal or financial information.

Insolvencies up 56%

The number of company insolvencies in September 2021 sat at 1,446 which is 99 more than recorded in August and 56% higher than last year’s figure of 926

The September figures also include the high-profile insolvencies of the nine energy companies that collapsed last month. 

Also in  September 2021 there were 1,328 creditors’ voluntary liquidations (CVLs), which is the highest level seen in since January 2019, although personal bankruptcies were down.

A third of UK’s small businesses have been classified as highly indebted according to the Bank of England report.

IHT – Planning can only go so far

Strong price growth in both house and share values, coupled with the current freeze on both nil rate bands (NRB) and residential nil rate bands (RNRB) allowances until 2026, means more estates will become subject to IHT, and the yield received by HMRC will continue to rise.

It is more important than ever to consider in-life wealth planning options to mitigate any future potential IHT exposure, but to also consider how those left behind will finance any tax bill that remains.

Depending on the circumstances a person could be entitled to an effective NRB of anything between £325,000 and £1,000,000.

It is also important to have a will. This is not just for potential planning, but it ensures a person’s estate does not fall into the intestacy rules which may have adverse consequences for tax but also lead to higher legal fees.

There are currently a number of ways to mitigate IHT during a person’s lifetime. The main ones being:

  • potentially exempt transfers (PETs) – i.e., making gifts and then surviving seven years;
  • annual exemptions of £3,000; and
  • making regular gifts out of excess income.

But, watch out for changes in the forthcoming budget.

The wealthier the estate the more difficult it becomes to avoid paying IHT.

Contactless payments – Rise to £100

The national rollout of the new £100 spending limit for contactless card payments begins from 15 October 2021, although it will take time for retailers to update their terminals

From 15 October 2021, consumers will start to see retailers accepting contactless payments up to the new £100 limit, which will give customers more flexibility when shopping in store.

Chancellor Rishi Sunak said: ‘Increasing the contactless limit will make it easier than ever to pay safely and securely – whether that’s at the local shops, or your favourite pub and restaurant. Millions of payments will be made be simpler, providing a welcome boost for retailers and shoppers.’

But, is there a risk of fraudsters scanning your cards without you knowing, say in a crowd. Make sure you have a shielded wallet or purse.

Tax Checks on Taxi Drivers

Changes to the licensing rules for taxi drivers will add a requirement to check their tax compliance before issuing new licenses in a bid to tackle tax evasion from 2022

HMRC has issued guidance on how the tax checks, known as conditionality, will work from April 2022 for licence applications initially in England and Wales. There are plans to extend the rules to Scotland and Northern Ireland from 2023.

HMRC believes that taxi drivers and scrap metal dealers are often part of the hidden economy, operating outside the tax regime, and has indicated that the scheme is likely to be extended in the future to cover more sectors.

Any individuals that make an application will need to complete a tax check if they are renewing a licence, or applying for the same type of licence previously held.

The key element of the new system is a tax check which must be carried out by the individual applicant and cannot be conducted by an accountant or tax agent.

There will be a number of questions to identify whether the individual complies with tax rules and how they pay any tax that may be due on income earned from the licensed trade before a licence will be issued.

Once the tax check is completed and verified by HMRC, a nine-character tax check code will be issued. This must then be included with the application to the licensing authority, so they can confirm a tax check has been completed.


If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.



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