“If you stand by your workers we will stand by you.”

This morally charged statement by the Chancellor in early July accompanied the surprise announcement that the Government would pay employers a £1,000 bonus for each employee brought back off furlough who remained employed until January next year.

What is now starting to emerge is that not all employers applied the same high moral standard when accessing the Coronavirus Job Retention scheme.

ITV reported on July 1 that 4,500 complaints of fraud had been made to the HMRC’s whistleblowing hotline by furloughed workers who allege they have been made to work despite being furloughed. On July 9, the HMRC reported their first arrest for furlough fraud in the UK. This was a major operation involving £495,000 of furlough fraud alongside allegations of tax fraud and money laundering.

A question now is how many other employers were not sticking to the rules? If the ITV report is accurate, it would seem that a lot of employees were being pressurised to work during those first four months of furlough.

Employees are being encouraged to report their concerns about furlough fraud directly to the HMRC. For those employers who did pressurise their workers to work during furlough, they are exposing themselves not only to HMRC investigations, and criminal sanctions, but also to complaints of whistleblowing from the individual employees and the significant compensatory payments which can accompany a successful claim. The recent arrest must be of real concern for those unscrupulous employers who have misused the scheme.

But is it only employers who have deliberately misused the scheme who should be concerned?

The sheer size and speed of implementing the UK’s furlough scheme is hard to grasp. The period between the announcement of the scheme’s existence to the payments portal being opened was one month. By June, the Treasury reported that some 8.9 million workers were furloughed, equating to a quarter of the UK workforce. As is almost inevitable when you stand up a new scheme in those timescales, the rules of the scheme were not always clear even for those employers who were playing it with a straight bat and trying to do the right thing.

From the very start, we dealt with questions from clients about whether they could or should take advantage of the scheme.

To an extent, the eligibility goalposts seemed to keep moving with successive statements from the Chancellor, guidance from HMRC statements (including tweets) and Treasury directions.

The rules of the scheme have been complex to understand. Clients asked us, did they need to prove serious financial hardship or an inability to meet staff costs? Did this need to be directly linked to the pandemic? How would they in time evidence that they met the threshold, whatever that threshold might be?

The current guidance (which out of interest at the time of writing is version 19) explains that employers are eligible to furlough employees if “you cannot maintain your workforce because your operations have been affected by coronavirus.”

Quite what this means is still not certain but we think it is unlikely that HMRC will have the resources to take a forensic approach to the decisions employers made to place employees on furlough, unless the decisions were made in bad faith.

For those employers who realise mistakes were made when submitting claims the new Finance Act 2020 offers a 90 day amnesty to self-report mistakes to avoid incurring additional penalties.

HMRC has said that it is not trying to “catch people out” where genuine mistakes have been made. Only time will tell how many employers will be able to stand by their decisions following an investigation from the revenue.

Gillian MacLellan is a partner at international law firm CMS.