There have been a spate of reports in recent months considering the approach of UK investigation and prosecution bodies to the rise in fraud and economic crime.
The Treasury Committee’s Economic Crime report, published on 2 February 2022, notes that economic crime is on the rise and that little progress has been made in tackling this growing problem. Indeed, the Committee noted that: ‘Economic crime seems not to be a priority for law enforcement’, despite the large number of agencies responsible for addressing the problem.
This report was followed by a briefing paper entitled Economic Crime in the UK: a multi-billion pound problem, released on 10 February 2022, which noted the increasing number of calls for reform of the legislative landscape in relation to economic crime, including the introduction of the long awaited beneficial ownership register for UK property, which was included in the recently enacted Economic Crime (Transparency and Enforcement) Act.
HMRC has estimated that £5.8bn has been lost to fraud and error across the following covid business support schemes:
coronavirus job retention scheme (CJRS) – 8.7% of total claims;
the self-employment income support scheme – 2.5% of total claims; and
the ‘eat out to help out’ scheme – 8.5% of total claims.
To tackle fraudulent and widespread errors in claims, the Taxpayer Protection Taskforce was created in 2021 and will remain in place until the end of 2022/23. The government has invested over £100m in this taskforce and has stated that it expects to recover £1.5bn by 2023. These forecasts leave £4.3bn unaccounted for and in January of this year the media began to report that the Treasury had written off £4.3bn in covid payments lost to fraud and error. Whilst such reports were quickly refuted by the chancellor, there continues to be discussion on how active HMRC will be in pursuing these erroneous covid payments.
In its report entitled HMRC performance in 2020/21, published on 11 February 2022, the PAC highlighted declining compliance activity, and noted that HMRC is only just beginning to examine compliance cases they had deferred in 2020/21. The PAC said that it was ‘extremely concerned’ about HMRC’s capacity, and indeed willingness, to clear the backlog of investigations which had been put on hold during the pandemic while at the same time tackling the large volume of potential fraud investigations relating to the covid business support schemes. It concluded that HMRC is not doing enough to claw back the large amount of public money lost through error and fraud in relation to such support schemes.
HMRC has publicly dismissed the majority of the PAC’s criticisms, stating: ‘While we acknowledge lessons that need to be learned in this report, we reject many of the statements made by the PAC. No fraudulent payments have been written off and we are taking action on multiple fronts to recover overpayments’.
With the government exerting increasing pressure on HMRC to replenish the exchequer’s coffers and the media highlighting the scale of fraud associated with covid business support payments, HMRC is likely to adopt a more proactive approach to investigating suspected fraud and have reiterated that they are endeavouring to recover all of the money which has been lost to error or fraud in relation to covid business support payments. At a time of increased public attention on economic crime generally, and in particular in relation to covid support payments, it is likely that the government will wish to be seen to be taking a hard line on suspected fraudulent activity connected with covid support schemes. An increase in criminal investigations, criminal asset recovery actions and ultimately prosecutions, can be expected in the coming months.
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HMRC under pressure to investigate covid payments lost to fraud
There have been a spate of reports in recent months considering the approach of UK investigation and prosecution bodies to the rise in fraud and economic crime.
The Treasury Committee’s Economic Crime report, published on 2 February 2022, notes that economic crime is on the rise and that little progress has been made in tackling this growing problem. Indeed, the Committee noted that: ‘Economic crime seems not to be a priority for law enforcement’, despite the large number of agencies responsible for addressing the problem.
This report was followed by a briefing paper entitled Economic Crime in the UK: a multi-billion pound problem, released on 10 February 2022, which noted the increasing number of calls for reform of the legislative landscape in relation to economic crime, including the introduction of the long awaited beneficial ownership register for UK property, which was included in the recently enacted Economic Crime (Transparency and Enforcement) Act.
HMRC has estimated that £5.8bn has been lost to fraud and error across the following covid business support schemes:
coronavirus job retention scheme (CJRS) – 8.7% of total claims;
the self-employment income support scheme – 2.5% of total claims; and
the ‘eat out to help out’ scheme – 8.5% of total claims.
To tackle fraudulent and widespread errors in claims, the Taxpayer Protection Taskforce was created in 2021 and will remain in place until the end of 2022/23. The government has invested over £100m in this taskforce and has stated that it expects to recover £1.5bn by 2023. These forecasts leave £4.3bn unaccounted for and in January of this year the media began to report that the Treasury had written off £4.3bn in covid payments lost to fraud and error. Whilst such reports were quickly refuted by the chancellor, there continues to be discussion on how active HMRC will be in pursuing these erroneous covid payments.
In its report entitled HMRC performance in 2020/21, published on 11 February 2022, the PAC highlighted declining compliance activity, and noted that HMRC is only just beginning to examine compliance cases they had deferred in 2020/21. The PAC said that it was ‘extremely concerned’ about HMRC’s capacity, and indeed willingness, to clear the backlog of investigations which had been put on hold during the pandemic while at the same time tackling the large volume of potential fraud investigations relating to the covid business support schemes. It concluded that HMRC is not doing enough to claw back the large amount of public money lost through error and fraud in relation to such support schemes.
HMRC has publicly dismissed the majority of the PAC’s criticisms, stating: ‘While we acknowledge lessons that need to be learned in this report, we reject many of the statements made by the PAC. No fraudulent payments have been written off and we are taking action on multiple fronts to recover overpayments’.
With the government exerting increasing pressure on HMRC to replenish the exchequer’s coffers and the media highlighting the scale of fraud associated with covid business support payments, HMRC is likely to adopt a more proactive approach to investigating suspected fraud and have reiterated that they are endeavouring to recover all of the money which has been lost to error or fraud in relation to covid business support payments. At a time of increased public attention on economic crime generally, and in particular in relation to covid support payments, it is likely that the government will wish to be seen to be taking a hard line on suspected fraudulent activity connected with covid support schemes. An increase in criminal investigations, criminal asset recovery actions and ultimately prosecutions, can be expected in the coming months.
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