AS much as £3.5 billion of public money may have been lost to fraud or error through the UK Government’s furlough scheme, HMRC says.

The Coronavirus Job Retention Scheme has paid 80% of workers’ wages for employees placed on leave since lockdown hit in March.

That has added up to £35.4bn so far. Now the revenue and customs body has told MPs it “assumes” anything from 5-10% of this was either claimed fraudulently or paid out in error.

Appearing before Westminster’s Public Accounts Committee (PAC) today, Jim Harra, 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 5% and 10%.

“That will range from deliberate fraud through to error.”

Around 779,500 jobs in Scotland have been supported by the furlough scheme, initiated by Chancellor Rishi Sunak. The country’s take-up rate is about 30% but this varies from region to region, with higher levels in the Highlands and Perth and Kinross compared to Inverclyde and Na h-Eileanan Siar.

The cross-party PAC estimates that a total of £30bn in tax was lost due to taxpayer error and fraud last year.

It called HM Treasury and HMRC to appear before MPs to explain how this will be reduced.

HMRC is now probing 27,000 “high risk” cases where a serious error is thought to have been made in furlough claims.

Employees who suspect their organisation may have fraudulently claimed government support are asked to report this to the HMRC through its website.

Harra said HMRC is “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”.

He went on: “We will expect employers to check their claims and repay any excess amount. What we will be focusing on is tackling abuse and fraud.”

Harra told the committee: “While we can’t get involved in any relationship between the employee and employer, we can certainly reclaim any grant that the employer is not entitled to, which includes grants they have not passed on

in wages to their employees.”

Commenting on Harra’s disclosure, SNP depute leader Keith Brown said: “The Tories’ utter incompetence helps explain how they have ballooned UK debt to more than £2 trillion.”

The Prime Minister’s spokesperson said “everything possible” would be done to reclaim money paid out to fraud, stating: “HMRC have sophisticated systems in place to assess all claims and to stop money being incorrectly paid in the first place.

“They have carried out checks both pre and post payment against claims that look out of step with the information that they hold on legitimate employers.

“They are currently looking into 27,000 high-risk claims where they believe a serious error or fraudulent claim has been made.

“Where genuine mistakes have happened HMRC will work with employers to correct claims but if any claim is suspected of fraud or is based on dishonest and inaccurate information payments may be withheld or need to be repaid.

“HMRC won’t hesitate to take criminal action in the most serious cases.”

The scheme is expected to end next month but there are calls to extend this.