Up to £3.5bn in Coronavirus Job Retention Scheme payments may have been claimed fraudulently or paid out in error, the government has said.

HM Revenue and Customs told MPs on the Public Accounts Committee it estimates that of the £35.4bn that the programme has cost the government to date, 5-10% of furlough cash has been wrongly awarded.

The scheme has paid 80% of the wages of workers placed on leave since March, up to a maximum of £2,500 a month.

Speaking to MPs on Monday, HMRC's permanent secretary, Jim Harra, 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."

The Public Accounts Committee estimates that a total of £30bn in tax was lost in 2019 due to taxpayer error and fraud. Both HM Treasury and HMRC were ordered to appear in front of MPs to explain how they were intending to reduce the problem.

Said Mr Harra:

"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, what we will be focusing on is tackling abuse and fraud."

So far, 8,000 calls have been received to HMRC's fraud telephone hotline. HMRC is now looking into 27,000 "high risk" cases where they believe a serious error has been made in the amount an employer has claimed, he added.

Mr Harra advised that any employee who feels that their employer may have been fraudulently claiming furlough money can report it to HMRC by filling in a form on its website.

“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.”