The bill, currently progressing through parliament, would allow the government up to 12 years to take civil action against individuals or entities involved in fraudulent claims related to Covid-19 support schemes. Without this change, some claims would become time-barred as early as March 2026.
Alan Sheeley, civil fraud expert and Partner at Pinsent Masons, said: “The proposals are of wider interest to business as it shows the government is able to retrospectively extend limitation periods for causes of harm. It is possible that we will see this happening with more general civil claims or further causes of action in the future, which would have a wide impact. This uncertainty means that business will need to assess their exposures, as well as insurers, with more potential liabilities exposed.”
The bill proposes to bring forward reforms to help identify, prevent and deter public sector fraud and error, and enable the better recovery of debt owned to the taxpayer. This bill is expected to deliver benefits of £1.5 billion over the next five years, as scored by the independent Office for Budget Responsibility (OBR). These benefits are expected to come from improved fraud detection, enhanced debt recovery mechanisms, and deterrence of fraudulent activity.
“The bill’s retrospective nature raises questions about legal certainty. Businesses that acted in good faith during the pandemic may now face renewed scrutiny, even years after the fact. Insurers, too, must reassess their exposure to claims that were previously considered time barred. With this in mind, businesses will need to rethink how they assess long-term risk.”
The bill empowers the Public Sector Fraud Authority (PSFA) to investigate and recover losses from fraud across public authorities, excluding HM Revenue and Customs (HMRC) and the Department for Work And Pensions, which have their own enforcement powers. It also introduces new civil penalties and enforcement tools, including the ability to recover funds directly from individuals’ earnings or bank accounts.
This retrospective extension marks a major shift in UK legal norms, where limitation periods – the time within which legal action much be initiated – are typically fixed and not altered after the fact. The move is part of a broader legislative effort to strengthen the government’s ability to combat public sector fraud and recover taxpayer money lost during the pandemic.
Max Rossiter, civil fraud specialist at Pinsent Masons, said “This demonstrates that government can implement change to combat fraud, even if it has to bend certain legal norms. While it should be wary of doing so routinely, combatting Covid-19 fraud was a manifesto commitment so it is understandable why the government is giving itself further time to bring claims.”