UK tax officials have seized £26.5m from non-existent businesses run by an ‘entrepreneur’ who used the Coronavirus Job Retention Scheme to make fraudulent claims.
According to the Financial Times, the ‘entrepreneur’ who is believed to be a 44-year-old man, used four companies to create seven fake employees to gain access to furlough funds. To create his fake employees, the man used thousands of counterfeit or stolen National Insurance numbers.
The four businesses used to claim furlough funds are believed to be an IT services company, a charity, a religious institute, and a research hospital, according to company registration documents.
Government data suggests that the companies filed their 2020 accounts as ‘micro-identities’. Micro-identities are very small companies that have a turnover of under £632,000, up to 10 employees, or assets of less than £316,000.
The companies each received furlough cash of between £5m and £10m in May this year, according to government data. HMRC reportedly has an ongoing criminal investigation into the furlough fraud.
Other investigations into the misuse of the furlough scheme are well underway, as a new task force of 1,250 staff was launched earlier this year in an effort to tackle fraudulent or mistaken furlough claims.
The furlough scheme, which ended in September, allowed for employers to claim up to 80% of their employees’ wages, capped at £2,500.
Whilst the furlough scheme has provided a lifeline for many businesses, there are cases where the scheme has been exploited.
According to Statista, as of August 2021, furlough claims accumulated to £68.5bn. The Treasury estimates that fraud and error in the scheme could be as high as 10%.
Investigations into furlough fraud are expected to continue as HMRC reportedly plans to recover £1bn from fraudulent furlough claims, over the next 2 years.