Businesses have been warned to be ready for potential furlough inspections due to be carried out by HM Revenue & Customs (HMRC).

Independent accountancy firm Kilsby Williams has advised business owners to ensure their records are still in order if they took advantage of the government’s Coronavirus Job Retention Scheme in the first 18 months of the Covid pandemic.

Last year, HMRC created a well-funded Taxpayer Protection Taskforce with over 1,000 inspectors to investigate fraudulent claims and issue penalties where non-compliance has occurred. It was set the target of recovering £1 billion over the next two years and many inquiries are yet to start.

Mary McDonagh, partner at South Wales-based Kilsby Williams, said: “The ever-changing rules regarding employee eligibility and earning periods meant that calculations became more complex and companies may have reported inaccurate claims.”

HMRC is using “Real Time Information” submissions to check claims and the taskforce is likely to investigate instances of non-compliance such as employers claiming for fictitious employees, employees working during the furlough period and grants not being paid to employees within a reasonable period.

Mary added: “The taskforce is predicted to audit thousands of SMEs to ensure furlough claims were legitimate. If an inspection is requested by HMRC, employers will need to provide up-to-date records and documents.

“We recommend that any claims made are reviewed now and if any erroneous amounts are found, these should be reported to help mitigate any penalties.”

The Coronavirus Job Retention Scheme, commonly referred to as furlough, protected nearly 12 million jobs across the UK during the pandemic, including many in the garment decoration sector, with the government subsidising up to 80% of employees’ wages.

It has been reported that furlough has cost the government £70 billion and, in some instances, been open to fraud. It is estimated that nearly £6 billion has been lost to fraud and error across the government’s Covid-19 support schemes including furlough.