What are the risks of false claims of furlough? - Altum HR
The legislation surrounding applications under the CJRS and the contractual requirements of Furlough have been very clear, however, unprecedented times of uncertainty can of course lead people to make irrational decisions. But what are the risks of false claims of furlough for your business? You can find out in our blog.
furlough, Covid-19
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What are the risks of false claims of furlough?

What are the risks of false claims of furlough?

On 20th April 2020, HMRC opened their portal for employers to access the Coronavirus Job Retention Scheme for furloughed staff. We saw the portal crash within minutes showing how many applications had been made in such a short time frame. The positive news is we are receiving reports that employers have received payment through the CJRS as early as five days after making a claim, showing the turnaround time of the process is very quick and works well

A question that some employers may be asking however is “How are HMRC ensuring the claims that are being made are valid?”

The legislation surrounding applications under the CJRS and the contractual requirements of Furlough has been very clear; however, unprecedented times of uncertainty can, of course, lead people to make irrational decisions.

Although no reports of denied claims have been released, taking advantage of such a beneficial service such as CJRS is undoubtedly going to have its costs and repercussions for employers in the future. 

The primary reason for Furlough is to protect employees and businesses from redundancy processes and to support the financial stability of the UK when business returns following the release of lockdown.

What are the risk of falsely furloughing staff?

To fully understand the risks of falsely furloughing staff, it is essential to understand the reason a contract of employment exists.


As of 6th April 2020, the Good Work Plan requires all employees to have a contract of employment and/or a statement of particulars. The document is a legally binding agreement that an employee is obliged to work for pay as required by the employer.

Equally, the employer is obliged to provide work. Employers are required to ensure their employees agree to the conditions of Furlough to ensure they are eligible to apply for the scheme.

This has two main factors:

  • The employee consenting to a reduced payment (varying the salary clauses in contracts of employment), and;
  • Agreeing not to work during the period of Furlough (varying the basis of the contract of employment)

We are fully aware of the risks to reducing pay without employee consent – ultimately, it can be claimed in both employment tribunals and small claims courts under unlawful withholding of pay or breach of contract. It seems, however, that some employers are not fully identifying the risk to having employees continue working. 

Fraudulent claims through HMRC have been a common thread of discussion among Employment Law Specialists and Accountants alike, namely with people asking how would the evidence be sought for false claims.

How HRMC know it was a false claim?

Although this information is not published officially, there are many ways checks can be made further down the line. Here are some points to consider:

Firstly, it is essential to remember that not only do HMRC control and review PAYE information; they also review businesses profits and accounts throughout the year. It will be easy enough for these to be checked alongside each other.

In January 2021, data will be available for HMRC to identify businesses running a profit or breaking even against the number of staff they had claimed for under CJRS – inevitably a disparity may result in an investigation? 

Secondly, although the employment tribunals are not open currently, it does not stop employees making claims for employment law breaches. Under the current circumstances, we know Health and Safety claims and unfair dismissal claims may be higher in the coming months. 

An important element to remember is the balance of power in the employment relationship. As an employer, you would expect an employee to act and behave in a responsible and professional manner. It is important to remember employees expect the same courtesy from their employer.

With recent updates from the government citing that the Coronavirus Job Retention Scheme will be coming to an end, employees will be fully aware of the requirements of furlough, and therefore where a business fails to act honestly with the requirements of furlough, they are running the risk of a shift in the balance of employees.

Essentially, having employees working while a business claims CJRS for them will ultimately shift the balance of power to the employee, opening up whistle blowing opportunities and potentially successful claims made against businesses by HMRC.

If there is evidence employees were furloughed incorrectly or continued working during the furlough period, this will be a crucial area of discussion and referrals could be made for HMRC to investigate should there be a disparity.

False claims will be found out eventually!

Although failures in the process may be deemed reasonable and acceptable because of Coronavirus, false claims through HMRC certainly wouldn’t be. 

Finally, as we know, nearly all businesses rely on technology to function, whether this is emails to delegate tasks or spreadsheets to record hours of work, there is always a trail of work. This information, although restricted through GDPR, is accessible through Subject Access Requests.

HMRC could easily work with the ICO to request such details, proving that employees were, in fact, working while claims were made. Don’t forget, similar to Tax evasion any member of the public or staff could whistleblow on businesses through thegov.uk website. 

If there is evidence employees were furloughed incorrectly or continued working during the furlough period, this will be a key area of discussion and referrals could be made for HMRC to investigate should there be disparity.

False claims will be found out eventually!

Although failures in the process may be deemed reasonable and acceptable because of Coronavirus, false claims through HMRC certainly wouldn’t be. 

Finally, as we know, nearly all businesses rely on technology to function, whether this is emails to delegate tasks or spreadsheets to record hours of work, there is always a trail of work. This information, although restricted through GDPR, is accessible through Subject Access Requests.

HMRC could easily work with the ICO to request such details, proving that employees where in fact working while claims were made. Don’t forget, similar to Tax evasion any member of the public or staff could whistle blow on businesses through thegov.uk website. 

What would happen if a false claim was made?

If employers were found to have falsely claimed for employees through CJRS, there are certainly risks to the future of individuals and businesses.

Some of these could include:

  • Stripping of director title due to breaches of fiduciary duties
  • Orders of repayment
  • Possible action by fraud prevention
  • Account investigations

In summary, the most crucial piece of advice we could give is to ensure your claims are genuine and records of furloughed employees are retained for at least five years.

We understand that this is a challenging time for employers, and they may feel under pressure or that they have limited options.

We’d encourage any employer feeling this way to get in touch and take advantage of our free 30-minute Covid-19 HR Consultation. We’ll provide you with some helpful advice and guidance on your situation and suggest ways that you could move forward legally, while accessing the right support.

If you’d like to take advantage, you can book your FREE Covid-19 HR Consultation with one of our expert HR advisors here. 

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