You should advise the client that instructing employees to work while furloughed is in contravention of the terms of the Coronavirus Job Retention Scheme. If, despite your advice, the client refuses to tell their employee to stop work you must cease to act for the client – see PCRT Helpsheet C: Dealing with errors as your client is acting contrary to the law.
You will also need to consider your anti-money laundering reporting obligations. These will depend on whether there are proceeds of crime. If you believe that your client made an innocent mistake and corrected matters straightaway as soon as you advised them, then it is unlikely there are proceeds of crime and a report is not required.
If, however you believe your client was fully aware of the restrictions on employees working for them while furloughed, then you should report the matter to your firm’s Money Laundering Reporting Officer because the client has knowingly claimed government funds to which they are not entitled. Money received under the scheme in such circumstances constitutes proceeds of crime.
If you are the firm’s MLRO/a sole practitioner, you should submit a suspicious activity report to the National Crime Agency.