UK Won't List Cos. Receiving Aid After Virus Fraud Exposed

By Molly Moses
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Law360 (October 16, 2020, 4:02 PM EDT) -- The U.K. doesn't plan to name companies that received funds for COVID-19 relief, a British government spokesperson said in response to a comment Friday from the House of Commons' Public Accounts Committee.

Publishing such a list would violate the U.K.'s strict rules about taxpayer confidentiality, the spokesperson said. The Public Accounts Committee's chairwoman, Meg Hillier, asked for more transparency from the government in light of the £3.5 billion ($4.5 billion) in relief payments from HM Revenue & Customs that may have been fraudulent or paid in error.

The government's top priority was providing relief quickly to those in need, said the spokesperson, who asked to remain anonymous.

"Our income support schemes have provided a lifeline to millions of hard-working families across the U.K., and we make no apology for the speed at which they were delivered," the spokesperson said. "Without them, lives would have been ruined."

The schemes were designed to minimize fraud from the outset while not holding up payments unnecessarily, the government representative said. HMRC has rejected 229 claims worth £10.2 million under the Coronavirus Job Retention Scheme and 14,000 claims worth £37.3 million under the Self-Employment Income Support Scheme as of Aug. 28, according to the spokesperson.

However, Hillier pointed to an Oct. 12 report by her committee on tackling the "tax gap" — the amount of tax theoretically owed versus what the government is able to collect.

"Our finding of the astonishing lack of economic planning for a pandemic shows how the unacceptable room for fraud against taxpayers was allowed into the government's hastily drawn-up economic support schemes," Hillier said in a statement Friday. Transparency should be a given where taxpayers' money is being used, she said, asking the government to list the companies that received furlough money.

"HMRC must act now to minimize fraud and error and ensure that taxpayers do not pay time and time again in the years to come," Hillier said.

The government spokesperson said the U.K.'s relief plans were designed to minimize fraud.

"We have rejected thousands of fraudulent claims," the U.K. representative said. "We will not tolerate those who seek to defraud taxpayers and will take action against perpetrators — including criminal prosecution."

The spokesperson further said HMRC is "the only revenue authority in the world that publishes the tax gap in this detail every year and are very clear that the tax gap is an estimate."

In addition to questioning the government's response to the novel coronavirus pandemic, the committee's report challenged the effectiveness of its Making Tax Digital initiative in closing the tax gap.

According to a joint survey by the Chartered Institute of Taxation and the Association of Taxation Technicians, the costs of compliance under the initiative "far exceeded government estimates," the report said.

"While HMRC had estimated the average transition costs to be £109 per [value-added tax]-registered business, less than 10% of respondents estimated their or their clients' costs at or below that amount, with 45% estimating costs between £109 and £500, and some 12% estimating costs over £5,000," the committee said.

The government spokesperson said the initiative "has been shown already to deliver a wide range of benefits to those VAT-registered businesses with taxable turnover above the threshold required to operate MTD since 2019."

Businesses "are already reporting wider productivity gains and reductions in input errors," the spokesperson said.

--Editing by Neil Cohen.

For a reprint of this article, please contact reprints@law360.com.

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