As we hopefully begin to emerge from the mists of social and financial uncertainty triggered by the Coronavirus pandemic, news that the Chancellor is set to outline plans for a Taxpayer Protection Taskforce comes as no surprise.
Given the amount of funds on offer through various schemes, allegations of fraud emerged early on in the pandemic, with news of arrests and even convictions for offences following. Perhaps understandably however, the government’s attention was focused elsewhere to combat the disease as it caused havoc across the country and the world. With Brexit now seemingly resolved, and the vaccination rollout in full flow, the government is looking to see how the economy can be rebuilt, and to recover as much funding as possible.
Staffed by over 1,000 HMRC officers, the taskforce will be looking into irregularities in claims made under the schemes such as the furlough, Eat Out to Help Out, and the Self Employment Income Support Scheme. The scale of the task ahead for the new team is an unknown, and this will be one of the first issues to be determined as the reviews take place. It is estimated that somewhere in the region of half of the approximately £45bn of the funding lent under the Bounce Back Loan scheme alone, may have been the subject of fraudulent claims and defaults.
It is likely that an enforcement strategy will need to be developed in order to manage the number of irregularities which are likely to be uncovered by the taskforce. Focus will clearly be brought to bear on organised crime groups and large scale targeted fraudsters, but what of the investigations of those at the lower end of the scale, such as the companies and individuals who may find themselves under scrutiny?
There has been much criticism of the regulation of the schemes on offer and the guidance available for eligible claims. As a result, it is inevitable that many companies and individuals alike will find themselves receiving a dreaded letter from HMRC, as enquiries into claims gather pace. Others may well receive a more direct ‘knock on the door’ from officers looking to gather evidence. In many cases, however, the issue will be whether monies were unintentionally over-claimed, or where provable, whether there are mitigating circumstances giving rise to the funds claimed.
As far as potential offences are concerned, various sections of the Fraud Act 2006 will come under consideration. Section 2 will come under particular consideration as it deals with offences where false representations are made, while Section 3 is concerned with fraud arising out of a failure to disclose information. In addition, Schedule 16 of the Finance Act 2020 deals specifically with obligations on individuals and businesses arising as a result of coronavirus support payments.
At some point, a line in the sand may well need to be drawn, and a pragmatic approach adopted to deal with the scale of the investigations. We may well see an increased use of the Code of Practice 9 investigation procedure, (“COP9”), which can be issued where HMRC suspects that tax fraud has been committed. COP9 allows for a one-time offer from HMRC, which is known as the Contractual Disclosure Facility (“CDF”), and provides the recipient with immunity from criminal investigation and/or prosecution. In return, the subject must admit to acting dishonestly in deliberately failing to declare income, gains or duties, and must also agree to fully disclose all omissions and irregularities which may have arisen over the previous 20 years. There are additional penalties which are imposed on a percentage basis, but they are perhaps an unwelcome relief when compared to the prospect of a criminal prosecution and possible conviction.
It is unlikely that HMRC alone will investigate and prosecute, and we may therefore see unprecedented co-ordination implemented across the various agencies such as the NCA, FCA and SFO, depending on the scale of the particular fraud. Quite how this all pans out remains to be seen, but what is clear is that as pressure eases elsewhere in the governmental fight against the pandemic, pressure is being brought to bear on those who the authorities suspect may have sought to profit from the generous schemes on offer.
As society begins to recover from the devastating impact of the virus, focus now turns to the economy, and the gaping hole in the country’s finances which needs to be filled.
The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.
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