HMRC Slammed On Tax Credits Errors And Fraud
27 May 2013
Posted by: Author: Amanda Banks
Source: Amanda Banks (Tax-News.com, London)
HM Revenue and Customs has been accused by a Parliamentary committee of having "hugely overestimated its progress in tackling error and fraud" in relation to its handling of tax credits for parents returning to work, with the result that a savings target of GBP8bn by 2015 has had to be revised downwards by GBP5bn.
The House of Commons Public Affairs Committee (PAC), which has previously criticized HMRC for "unambitious" customer service targets, notes in a new report that data from 2010-11 showed that an increase in interventions from 123,000 individuals to nearly two million had produced only a two-fold increase in revenue. HMRC had planned to reduce fraud and error to 5 percent for 2010-11, but the level was actually at 8.1 percent, which was GBP850m higher than expected. The following year, GBP1.7bn in tax debt was written off.
The PAC also notes that 70 percent of lost revenue is thought to be due to taxpayer error rather than fraud. Although HMRC claims that it is responsible for errors in only 2.5 percent of cases, the PAC referred to evidence from Citizens Advice on inaccurate advice given to customers by HMRC over the phone.
The PAC believes that the shortfall was because HMRC had not tested how effective its activities would be, and that the body "needs to improve the time it takes to produce the data it needs to monitor progress and determine actions." Further, HMRC also requires a more accurate impact measurement and to improve in-year tracking of claims.
Noting that 80 percent of error and fraud related to related to taxpayer change of circumstances, the PAC advised HMRC to make better use of available data, including an automatic check on data received on Child Benefit. Further, the appeals process should be speeded up.