UP to £3.5billion has been paid out in wrong or fraudulent furlough schemes, HMRC fears.
Between five and ten per cent of Covid wage support payments are likely to be wrong, officials have told MPs.
It will be the result of a mixture of deliberately fraudulent claims and human error, HMRC’s top civil servant Jim Harra said.
The Government has so far paid out £35.4billion in furlough cash, according to the latest Treasury figures.
It means that somewhere between £1.75billion and £3.5billion could have been paid out wrongly.
Mr Harra told the powerful Commons Public Accounts committee yesterday that his team will now be targeting employers who have abused the scheme but will not penalise those who made “legitimate mistakes”.
The HMRC permanent secretary said: “We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between five per cent and ten per cent.”
“That will range from deliberate fraud through to error.
“What we have said in our risk assessment is we are not going to set out to try to find employers who have made legitimate mistakes in compiling their claims, because this is obviously something new that everybody had to get to grips with in a very difficult time.
“Although we will expect employers to check their claims and repay any excess amount, but what we will be focusing on is tackling abuse and fraud.”
It is the first time HMRC has spoken publicly about the level of potential fraud that could have been committed as part of the job retention scheme, which covered up to 80 per cent of an employee’s salary while they were on furlough.
The Government rolled out the massive scheme at breakneck speed, causing many experts to say that a certain amount of fraud was inevitable.
Furlough is now winding down and is expected to end for good next month, however businesses who bring staff back from furlough will receive another £1,000 if the employee is still in work by the end of January.
By August 16 this year, 9.6 million people had been put on Government-supported furlough, with 1.2 million employers claiming the support.
Meanwhile, around 2.7 million self-employed people have claimed around £7.8billion in support from the Government.
Mr Harra said that an academic study has estimated that the level of fraud and error might be even higher than ten per cent.
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