As we know, the furlough scheme is back and, whilst that is clearly good news for employers, it comes with the same warnings from the Revenue that came with the first scheme, namely for employers to make absolutely sure all claims are genuine. That message is especially important now that the Revenue's amnesty from the first furlough scheme is over - that ended last month on 20 October - and if there was any doubt the Revenue's determination to investigate and punish fraud then the recent conviction of Dominic Chappell for tax evasion serves as a salutary reminder that they have significant powers and will use them – Chappell was sentenced at Southwark Crown Court to six years in prison after being found guilty tax evasion on over £2million of income he received when the company he owned bought the high street chain BHS for £1 in 2015. Litigator Andrew Sackey comments on that case for Outlaw and says that prosecution was the result of HMRC's new, very focused, approach of building and pursuing cases against wealthy individuals and employers who break the law. He should know – he was responsible for the Revenue’s approach to targeting at organisations which fail to take reasonable measures to prevent corporate crime. Andrew makes the point that employers need to be able to point to those measures in the event Revenue come calling. So what does that mean for employers as far as the furlough scheme is concerned? What measures should employers be taking now the second furlough scheme is up and running? I phoned Andrew Sackey and put those questions to him:
Andrew Sackey: "Well I think the first thing to say is that furlough in all its guises has been an absolutely massive undertaking. At its height, over 1.2 million businesses were supported by it so there's a huge number of moving parts involved and when people engaged with furlough they had to comply with a variety of rules and they've complied, or they appear to have complied, with the core rule that you can't work whilst furloughed, pretty well, and people understand what that means and what that looks like. But there was another requirement, and that was you can't provide a service to your employer and that is a little bit more nebulous because that could include responding to emails, arranging meetings with people who are not furloughed, or doing other sort of promotional activities. The issue there is that if staff are doing this, even though they are well intentioned and well meaning, they are actually storing up a big compliance issue for their employers because it's not why they were working, it's the fact that they are working, and because so many people are working remotely the centre don't necessarily have visibility of what's going on and so the issue around due diligence is, certainly in terms of how it's expressed by HMRC, a growing acknowledgement that they anticipate that employers will be doing due diligence to make sure that their claims are properly formed and that means checking, to one extent or another, that your staff not only weren't working, but they also weren't providing a service to the employer. So the concept of due diligence, and you have to be mindful of course of data, privacy, etcetera, but it's a concept of checking, for example, whether your furloughed staff have been transmitting or receiving volumes of emails, and you don't need to look into, necessarily, the content of the emails because they may be personal, of course, they may be in respect of well-being, but you need to understand what the subject matter is. So there are different types of searches that you could format to begin to give you a first indicator either that everything is good, or that there might be some problems that you might need to look at a little bit more closely. The pace of this is quite important because if there have been problems, if there have been breaches, then HMRC has put out an amnesty. So you know that if you notify HMRC before the 20th of October, for example, you're not going to be liable to any other sanction or penalty. So the clock is really ticking to understand whether you've had an issue because you need to know you've had an issue before you can notify it. So that's the sort of thinking behind due diligence.”
A final point on this. Back in September, during the first furlough scheme, Andrew and his team produced a flyer setting out essential next steps to carry out before the Revenue's amnesty deadline, but, importantly, the references in that document to "work reviews" remains relevant. So this is the process by which you identify and monitor your employees and check that the requirements of the furlough scheme are being met. We are currently busy helping clients with those work reviews so please do get in tough if you would help with that.