Debenhams claimed £40.5m of taxpayers’ money through Rishi Sunak's furlough scheme after the failed retailer fell into administration, records show.
The department store chain - which is now being liquidated after administrator FRP Advisory failed to find a buyer - legally claimed the sum from HMRC between 9 April and 8 October, according to a progress report.
Furlough was set up by the Chancellor when Covid struck to preserve jobs during the pandemic, and pays staff up to 80pc of their normal wages.
A spokesman for Debenhams said it used the money “in exactly the way the scheme was intended, which was to preserve jobs while stores were closed in line with government regulations.”
Administrators are allowed to furlough and claim for employees under the job retention scheme, but according to HMRC it should only be used if there is a reasonable likelihood of retaining the employees.
JD Sports initially emerged as the frontrunner to takeover the beleaguered department store, but talks collapsed on Monday shortly after administrators moved in at Sir Philip Green’s Arcadia Group, Debenham's biggest concession holder.
Debenhams' collapse puts 12,000 jobs at risk.
The 242-year-old retailer fell into administration in April for the second time in 12 months as the pandemic forced the temporary closure of its 142 stores and made its precarious financial position even worse.
It has desperately tried to stay afloat with drastic cost-cutting, shedding 6,500 jobs since May.
Shoppers descended on Debenhams’ website and stores on Wednesday to take advantage of discounts of up to 70pc as it sells off remaining stock. The company owes up to £229m to trade creditors, according to documents filed at Companies House.
Shoppers reported being in virtual queues with as many as 900,000 users on Wednesday morning after Debenhams launched the fire sale. By mid morning the website had crashed as it struggled to cope with demand.
HMRC declined to comment.