what do we know about the Taxpayer Protection Taskforce? Is it what one expects?

Posted On: 28 Mar 2021

In this article Amit Puri, Tax Director at Lancaster Knox, considers the instigation of a new Taxpayer Protection Taskforce Unit following the Budget announcement on 3 March 2021. Amongst the fanfare and promises, the Chancellor said the Government will be investing over £100 million into a new unit at HM Revenue & Customs (“HMRC”) to combat extensive fraud within the various COVID-19 financial support packages, with more to come.

We were told HMRC would recruit some 1,250 – 1,265 new staff for the Taxpayer Protection Taskforce to do the necessary (protecting the public purse for law abiding people and the next generation).

From the outside most will agree that this looks promising and of course necessary, representing one of the largest responses to a fraud risk by HMRC. In addition, the Government said it will raise awareness of enforcement action being taken in order to deter ongoing and newer frauds.

The dedicated Taxpayer Protection Taskforce is expected to be responsible for investigating and combatting those in society who have fraudulently claimed taxpayers’ money. HMRC aims to detect tax avoidance and tax evasion, criminal activity as well as recovering money that has been over-claimed by businesses. In practice this is irrespective of whether there was/is fraud or finding genuine errors.

There is little more information in the public domain about HMRC’s Taxpayer Protection Taskforce unit, but we would expect the unit to run for at least a few years, so that the actions it takes and strategies it employs have some chance of coming to fruition and securing the much needed revenues for the public purse.

HMRC publicly said they had already opened over 10,000 investigations into ‘suspected fraudulent activity’ and in some cases begun criminal investigations and made arrests too, so one should expect TPT to support those actions and perhaps bring about more order… even the public have started to scrutinise published lists of employers (showing over 750,000) claiming furlough cash!

However, from our experience, there is a likelihood that the Government is claiming more credit than might be due, since HMRC had already set their sights on fraud and incorrect claims, and started to take action. As with many announcements like this, the HMRC staff/teams pointed at the focus areas are often already deployed but are simply being moved around or suddenly praised. So it’s possible that another taxpayer group or industry will get a comparatively lighter touch instead. We will have more on this soon as we take this up with HMRC directly.

Covid-19 pandemic support schemes – potentially in TPT’s sights

  • Coronavirus Job Retention Scheme (CJRS, the so called ‘furlough’ scheme);
  • Self-Employment Income Support Scheme (SEISS);
  • Bounce Back Loan Scheme (BBLS);
  • Coronavirus Business Interruption Loan Scheme (CBILS);
  • Coronavirus Large Business Interruption Loan Scheme (CLBILS);
  • Closed Businesses Lockdown Payments (CBLP);
  • Lockdown Restrictions Support Grants (LRSG); and
  • Eat Out To Help Out Scheme (EOHO).

It’s worth noting the Government promised getting furlough cash to businesses quickly as per the demands at the time, within six working days in fact, and this of course greatly restricted HMRC’s pre-payment due diligence options.

TPT action

We understand that the Taxpayer Protection Taskforce’s approach will not only involve (routine looking) compliance checks but also in-depth and intrusive fuller civil / criminal investigations. We expect HMRC to for example identify, check and pursue:

  • Genuine mistakes with application processes;
  • Professional advice being taken and followed wherever appropriate;
  • Ongoing compliance requirements to ensure eligibility for schemes;
  • Robust business and claims related record keeping;
  • Robust PAYE employment records;
    • Businesses claiming furlough funds for more people than are employed;
    • Businesses claiming the support while their employees continued to work;
    • Businesses claiming excessive EOHO support funds; and
  • Businesses taking out loans with no genuine intention to repay taxpayers’ money.

We are not surprised that HMRC wants to publicly name and shame those ‘deliberately defaulting’ as well as applying financial sanctions. We’re sure you agree that systematic dishonesty must be targeted and weeded out, but others will need care, protection and assistance even when HMRC aren’t being heavy handed.

You might recall reading (in October 2020) that employers had already voluntarily repaid £278 million to HMRC for furlough scheme funds they did not need or took in error. Around that time HMRC estimated some £275 million in additional furlough over-payments should be recoverable, citing a high risk of furlough fraud.
Before that, in September 2020 HMRC’s CEO had said HMRC estimated that some 5-10% of all furlough claims will be fraudulent, which was some £2.0 – 3.9 billion! In November 2020 HMRC estimated that some 1-2% of self-employed individuals’ grant claims could be erroneous – we cannot help to think this is grossly under-estimated. Also, there has been quite the debate around potential errors and fraud involving business loans initiatives with even higher, eye-watering monetary losses running into tens of £ billions!

Questions you might ask HMRC:

  • What skill levels will HMRC’s staff in TPT have?
  • Will ‘Eat Out to Help Out’ hospitality funding claimants be under TPT’s radar?
  • What is the extent to which dormant and insolvent businesses, and wholly new ones, have benefited?
  • Will employers claiming furlough cash for already ex-employees be identified?
  • Which particular sector(s)/industry can expect significant attention from HMRC, ‘hospitality being an obvious one?
  • How much revenue have HMRC raised so far from their enquiries action? Should the running balance(s) be made public?
  • How much revenue have HMRC secured voluntarily, from erroneous claims? Should the running balance(s) be made public?
  • What can we, common folk, do to report fraudulent claims and encourage others to voluntarily co-operate with HMRC and pay back any excessive claims?

Please don’t hesitate to get in touch if you or a business you know needs help understanding their obligations and options. This will become a minefield to navigate as time goes on and complications encourage HMRC to use heavier approaches.