The number of self-employed people under investigation for misusing the Self-Employment Income Support Scheme (SEISS) has jumped by more than a quarter (27%) in the last three months, according to HMRC figures.
The data, obtained by law firm BLM through two freedom of information requests (FOI), found that at the end of quarter two for 2021, the tax watchdog had spent £16 million investigating fraudulent misuse of Covid-19 support schemes.
As of 30 June, HMRC opened nearly 15,000 investigations into the potential misuse of the Coronavirus Job Retention Scheme (CJRS), Eat Out to Help Out (EOHO) as well as the SEISS.
Figures showed that between 1 April and 30 June, there was a significant rise (27%) in the number of self-employed people being investigated for misuse of the SEISS, with 1,367 new cases.
This brings the total number of those being investigated for fraudulent use of SEISS to 6,351.
In comparison, the number of investigations into the fraudulent use of CJRS rose by just 3.6 per cent, with the total of open cases now at 7,632.
And the number of fraud cases opened into misuse of the EOHO scheme rose to 584 – a rise of 36 per cent.
Although no arrests have been made for those investigated for misusing the SEISS, five have been arrested for suspected CJRS fraud and another five for EOHO.
Julian Cox, partner and head of employment at BLM, urged small businesses and the self-employed to review their process if they accessed these schemes:
“[…] The SEISS has been a thriving ground for potential misuse of public funds. Self-employed individuals and members of a partnership tend to have a less uniform structure in their business compared to larger organisations.
“It could well take HMRC longer to spot instances where the person in question has accessed funds fraudulently, hence why we’re seeing a sudden rise in interventions now.
“[… But] given the increased investigative activity, it’s clear that self-employed, small business owners and larger organisations alike need to ensure that if they’ve accessed these schemes, they have done so properly.
“Anyone caught in the midst of an intervention will need to seek thorough advice, as it will prove decisive in handling any legal action taken by HMRC.”
On analysing the findings, Cox added: “Given the short amount of time these extensive support schemes were assembled and launched in, and the complicated processes and criteria required to access them, some individuals and businesses will have made honest mistakes in their applications.
“[…] Though we don’t currently know how many of these interventions actually bear out, we are now seeing the first round of arrests and prosecutions commence.
“There’s real risk here that the government could lose out on millions – if not billions – due to fraudulent activity, and the investigations into this. With £16 million spent by HMRC so far, and a further £100 million earmarked, it is going to be vital that the government works quickly to distinguish the skulduggery from the genuine mistake.”