Covid fraud: HMRC and the ‘Eat Out to Help Out’ scheme
The Government launched the ‘Eat Out to Help Out’ (EOTHO) scheme on the 3rd August 2020 to boost the hospitality sector which had suffered heavily from falling revenues during the first lockdown. On Mondays, Tuesdays and Wednesdays during August, diners received a 50% discount for food and non-alcoholic drinks at participating establishments (up to a maximum discount of £10 per diner inclusive of VAT). The restaurant would be able to claim back the discount from the Treasury. Businesses had to comply with strict conditions to qualify for this extraordinary support. This included the need for meals to be sold for immediate consumption on the premises in a dedicated public dining area. Participating businesses were required to keep daily records confirming the number of customers benefitting from the scheme and the value of every transaction. Each week the business could make their claim inputting this data with eligible claims being paid within 5 working days.
This easy to access scheme, saw claims made for over 100 million meals at an estimated cost to the Treasury of a staggering £522 million. Unsurprisingly – as with furlough – there are concerns that businesses may have wrongly benefitted from the regime and fraudulent claims made including for:
- meals not consumed on premises
- 50% discount being given before alcohol, service charge and other discounts were applied
- tendering of false receipts for meals never purchased.
Misuse of the ‘Eat Out to Help Out’ scheme
The scheme will inevitably have led to a number of wrongful claims being made. Some mistakes may have been made in honest error, by businesses seeking to navigate this novel scheme. However, other wrongful claims may have been intentional. Misuse of the EOTHO scheme could lead to criminal investigations including fraud by false representation, false accounting, and conspiracy to defraud and cheating the public revenue.
We know that HMRC have commenced criminal investigations and indeed already there have been arrests. This was reinforced by a spokesperson for HMRC who was reported as entreating that, “anyone concerned that an establishment is abusing the scheme can report fraud to HMRC”. We expect to hear that more establishments have come within the sights of HMRC.
A recent well publicised example of this is a franchisee of the Papa John’s Pizza chain. The allegation is that claims were made for meals that were for collection and delivery only. This would have breached the requirement for the meal to be consumed on the premises. In addition, there are reports that thousands of fake orders may also have been processed i.e. making claims for food orders that did not exist. HMRC also recently announced arrests of a number of individuals in London for allegations of Cheating the Public Revenue and Fraud by False Representation. Both are potential offences where a dishonest claim is made to HMRC in connection with EOTHO. They seek to deal with any dishonest conduct that results in the Revenue being defrauded, including where false documents might be relied upon (for example, receipts or documents supporting false food orders).
It is our view that often the critical element here will be “dishonesty”. Clearly, a claim that appears to be knowingly made using a false document is likely to be considered dishonest. However, there may be a variety of circumstances where claims made wrongly were in honest error.
How we can help
If you believe you may have mistakenly claimed for payments under the scheme to which you were not entitled, you should urgently seek legal advice. On the 2nd November 2020 the government published guidance for businesses seeking to repay wrongly claimed EOHO payments. Strict time limits have been set for notification and repayment.
Penalties should not be raised if HMRC is convinced the business did not realise the claim was wrongful at the time, and restitution is swiftly made. It will be important to make use of this period of leniency. We can quickly and accurately analyse your circumstances and engage HMRC to maximise your opportunity of avoiding heavy penalties or criminal sanctions. Should you already have been notified of criminal investigation or prosecution, we can help you navigate this.
Joint heads of Financial Crime and Regulatory, Kiran Mehta and Ruth Harris, at Hodge Jones & Allen, are well placed to assist you. They can provide expert advice and representation in connection with concerns that you may have about the EOTHO scheme and other COVID Fraud. If you are concerned that you may have been impacted by EOTHO fraud in some way then please do not hesitate to get in touch with our Financial Crime & Regulatory solicitors on 0808 271 9413.