HMRC attempts at cutting fraud "extremely poor" say MPs

Published on Friday, 24 May 2013 10:11
Posted by Scott Buckler

The Public Accounts Committee publishes its 4th Report of Session 2013-14 which, on the basis of evidence from HM Revenue & Customs and Citizens Advice, examined tax credits error and fraud

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

"HMRC's performance in cutting the level of fraud and error in the tax credits system has been hugely disappointing and extremely poor. Over 8% of taxpayers' money spent on tax credits is lost as a result of fraud and error, with people getting more money than they were entitled to. An estimated 1 in 5 awards is subject to fraud and error. This is too high.

"The department's failure to cut the fraud and error rate to 5% has cost the taxpayer dear. HMRC committed to saving £8bn by 2014-15. They now say they will only save £3bn and in 2011-12 wrote off £1.7 billion of tax credit debt as uncollectable. In these strained times, the Government cannot afford these failures.

"The department does not properly understand which actions are effective in dealing with these issues. It increased the number of interventions on individual cases tenfold, but this only resulted in a doubling of the money saved by the taxpayer.
"If the department is to improve on this, it must understand its own performance better and that will require a more accurate way of measuring the impact of its work.

"At the same time, it is clear that claimants are not being well supported by HMRC. HMRC is not responding effectively to the crucial problem of claimants not reporting their circumstances accurately, especially when their circumstances have changed.

"The advice and guidance it provides for claimants need to improve. HMRC thinks that it is responsible for only 2.5% of tax error credit. This looks far-fetched in the light of evidence from Citizens Advice on the inaccuracy of HMRC advice to claimants over the phone. And appeals by claimants are growing, with a high rate of success for claimants.

"HMRC has made some progress in analysing risks but nowhere near enough. Error and fraud in two categories - working hours and undeclared partner - together accounted for losses of over £1 billion in 2010-11. The department needs to make more effective use of available data to identify higher risk claims."

Margaret Hodge was speaking as the Committee published its 4th Report of this Session which, on the basis of evidence from HM Revenue & Customs and Citizens Advice, examined tax credits error and fraud.


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