SEISS Fraud Investigation: What You Should Do First if HMRC Writes to You?

What Is the Difference Between an Incorrect SEISS Claim and Fraud?

An incorrect claim arises from a genuine mistake about the eligibility rules. 

SEISS fraud requires deliberate dishonesty: specifically, that the claimant made a false representation knowing it was untrue, or that they were reckless as to whether it was true.

How HMRC approaches incorrect claims

HMRC has stated publicly that prosecution is reserved for the most serious cases of SEISS fraud. 

Where a claim was made due to an inadvertent error or an honest misunderstanding of the rules, repayment of the grant is all that HMRC requires. 

Civil penalties rather than prosecution are the typical outcome where there is no evidence of deliberate conduct.

HMRC deals with a large volume of SEISS compliance work and uses a risk-based approach to decide which cases warrant further examination. 

An honest mistake, confirmed by prompt and voluntary repayment, is treated very differently from a case where HMRC has evidence of deliberate false declarations.

What “dishonest false representation” actually means

Fraud by false representation under the Fraud Act 2006 involves making a representation dishonestly, knowing that it is or might be false or misleading, with the intention of making a gain or causing loss or the risk of loss.

The prosecution must prove these requirements beyond reasonable doubt.

For example, knowingly claiming that your business was still trading when you had permanently ceased trading could support a fraud allegation.

However, if you genuinely believed you met the conditions, that belief may be relevant to whether the prosecution can establish dishonesty.

The court will consider what you understood at the time, alongside the available records.

Why the distinction matters for each SEISS grant

The five SEISS grants operated under different rules between May 2020 and September 2021.

For the first two grants, eligibility included whether your business had been adversely affected by coronavirus during the relevant period.

For grants 3, 4 and 5, claimants also needed a reasonable belief that reduced activity, capacity or demand, or an inability to trade, would significantly reduce trading profits.

The fifth grant introduced an additional turnover comparison for most claimants, affecting the amount payable.

HMRC must therefore consider the rules applying to each claim.

A later improvement in business income does not automatically make an earlier claim fraudulent if the relevant conditions were genuinely met when you claimed.

Can a SEISS Claim Lead to a False Representation Charge?

Yes. HMRC and the Crown Prosecution Service can pursue prosecutions for SEISS fraud under the Fraud Act 2006.

But whether a prosecution follows depends on whether the available evidence shows that the claimant made a false representation dishonestly and with intent to gain.

What declarations the claimant actually made

For the earlier grants, HMRC generally calculated the amount payable using trading profits from tax returns it already held.

Claimants still had to confirm that they met the relevant eligibility conditions, including trading requirements and the impact of coronavirus.

For grants 3 and 4, the declarations included a reasonable belief that the disruption would significantly reduce trading profits.

For grant 5, most claimants also provided turnover figures so HMRC could determine which grant rate applied.

If HMRC alleges that your claim was fraudulent, the specific declaration being challenged matters.

For example, an allegation about inaccurate turnover figures for grant 5 is different from an allegation that your business had already ceased trading.

What the prosecution must prove

For fraud by false representation, prosecutors must establish that:

• You made a false or misleading representation.
• You knew it was, or might be, false or misleading.
• You acted dishonestly and intended to make a gain or cause loss or the risk of loss.

These requirements must be proved beyond reasonable doubt. A genuine mistake about eligibility does not automatically satisfy them.

However, claiming that you believed you were eligible is not enough on its own. Investigators will examine whether your circumstances and records support that explanation.

The role of trading status in a SEISS fraud investigation

HMRC may investigate whether you were still carrying on a qualifying trade when you applied.

For example, temporarily stopping work because of coronavirus restrictions is different from permanently closing your business before making a claim.

The relevant questions include when trading stopped, whether you intended to continue and what you reasonably believed about your circumstances.

Your records may help establish the position for each grant.

The fact that your business subsequently closed does not automatically mean you were ineligible when you originally claimed.

Will Repaying the Grant Stop the SEISS Fraud Investigation?

Repaying a SEISS grant removes or reduces the civil liability but does not automatically bring a criminal investigation to an end.

HMRC can still examine whether a dishonest claim was made.

Why repayment and criminal investigation are separate processes

HMRC’s civil compliance function and its Fraud Investigation Service operate separately. 

A repayment satisfies the civil debt: it confirms that the money is returned and reduces or eliminates the financial liability for the amount repaid. 

It does not prevent HMRC’s Fraud Investigation Service from continuing to examine whether a criminal offence was committed.

HMRC has stated publicly that it will pursue prosecution in the most serious SEISS fraud cases regardless of whether repayment has been made. 

Repayment may be a relevant factor in how the investigation is conducted, but it does not guarantee that the matter will be treated as closed.

The risk of repaying without legal advice

If HMRC has requested repayment, establish the basis for the demand and whether you have grounds to challenge it.

Paying the money back is not automatically an admission of criminal guilt.

However, explanations or statements made when arranging repayment may be relevant to an investigation.

A solicitor can advise how to address the financial liability without making unnecessary or inaccurate admissions about the original claim.

What to do if full repayment is unaffordable

If you cannot repay the full amount HMRC has demanded in a single payment, HMRC can arrange time-to-pay agreements that allow the debt to be repaid in instalments. 

This is a standard facility and does not in itself signal anything adverse about the nature of the claim.

A solicitor can assist in approaching HMRC about a time-to-pay arrangement in a way that deals with the civil debt without compromising your position in any parallel investigation. 

Acting promptly and cooperatively on the civil side can be relevant to how HMRC treats the matter overall.

Should I Speak to HMRC or the Police Without a Solicitor?

You should not give a substantive account to HMRC or the police before speaking to a solicitor, particularly if you have been asked to attend an interview under caution as part of a SEISS fraud investigation.

The difference between routine correspondence and an interview under caution

A letter from HMRC asking for information or repayment is part of a civil compliance process. You have the right to respond through a solicitor, and doing so does not indicate guilt or non-cooperation.

An interview under caution is a formal step in a criminal investigation. Before the interview begins, HMRC or the police will give you the standard caution, which tells you that you do not have to say anything. 

It may harm your defence if you do not mention when questioned something you later rely on in court, and that anything you do say may be given in evidence. 

That caution reflects your legal rights under the Police and Criminal Evidence Act 1984 and its Codes of Practice.

What rights exist at interview under caution

You have the right to free and independent legal advice before and during any interview under caution. That right applies whether the interview is conducted by HMRC’s Fraud Investigation Service or by the police. 

The interview can be delayed to allow a solicitor to attend or to give telephone advice beforehand.

A solicitor will advise you on whether to answer questions, give a prepared statement or decline to answer, based on what the evidence actually shows.

Why a solicitor should handle both fronts together

An HMRC investigation may involve a repayment dispute and allegations of criminal fraud at the same time. Statements about your eligibility, trading status or financial circumstances may be relevant to both.

For example, an explanation provided during a repayment dispute could later be considered in the criminal investigation.

A solicitor can help coordinate your responses so that they remain accurate and consistent.

What Records Can Help Explain My SEISS Grant Claims?

Records that show your trading activity, income and business operations at the time of each SEISS claim are the most useful starting point in any SEISS fraud investigation.

Tax records and self-assessment returns

HMRC used historic self-assessment returns to calculate SEISS payments.

• For grants 1 to 3, the calculations generally used trading profits from relevant returns covering 2016–17 to 2018–19, subject to the scheme’s rules.
• For grants 4 and 5, HMRC also considered 2019–20 tax return information when determining eligibility and grant amounts.

If HMRC alleges that the amounts were incorrectly calculated, those returns and any subsequent amendments may be relevant.

• For grant 5, the turnover figures supplied during the claim process may also require checking against your business records.

How a solicitor uses these records

A solicitor can compare your original declarations with the records available from each claim period. They can identify whether the discrepancy concerns trading status, the effect of coronavirus, turnover figures or another eligibility condition.

Where documents are missing, bank records, customer correspondence or accounting records may help reconstruct the position.

The aim is to establish what happened and what you knew when each claim was made.

Penalties and Sentencing: What Are the Possible Consequences of a SEISS Fraud Investigation?

The consequences depend on whether HMRC is seeking civil repayment or pursuing criminal allegations. An incorrect claim can lead to repayment, interest and potentially a civil penalty. A criminal conviction can carry more serious consequences.

Repayment and interest

Where HMRC establishes that you received a grant without entitlement, it can assess the overpaid amount for recovery. Payment is generally due within 30 days of the assessment, and late-payment interest may apply.

The amount recoverable depends on the grant and the reason HMRC considers it was overclaimed.

You may also have rights to challenge the assessment.

Civil penalties

HMRC can impose penalties for failing to notify it about SEISS grants that you were not entitled to receive or keep. The penalty depends on the statutory rules and what you knew about your entitlement.

Where a claimant knowingly retained an overpayment without notifying HMRC within the required period, penalties can reach 100% of the amount involved. Different treatment may apply where the claimant genuinely did not know they were ineligible.

Repayment and penalties should therefore be considered separately rather than assuming every incorrect grant attracts an additional penalty.

Criminal sentences for SEISS fraud

Fraud by false representation carries a maximum sentence of ten years’ imprisonment in the Crown Court. However, that is the statutory maximum, not the sentence automatically imposed following conviction.

Courts consider the amount obtained, the degree of planning, the defendant’s conduct and other aggravating or mitigating circumstances. Not every conviction results in immediate imprisonment.

The prosecution must first establish the criminal offence beyond reasonable doubt.

How a Solicitor Can Help at Every Stage of a SEISS Fraud Investigation

If HMRC has accused you of making fraudulent SEISS claims, a solicitor can review the correspondence and identify whether you face a civil investigation, criminal allegations or both.

They can examine the eligibility rules for each grant, compare your declarations with the available records and advise whether HMRC has grounds to allege dishonesty.

A solicitor can also help you respond to repayment assessments, consider appeal rights and represent you during an interview under caution.

Where civil and criminal proceedings overlap, coordinated advice may help prevent misunderstandings or inconsistent explanations.

Our fraud and financial crime team advises individuals facing HMRC investigations and allegations involving Covid support payments.

You can send an online enquiry or find out more about our fraud and financial crime service to discuss your position and next steps.