Introduction »

Tax credit errors

In the autumn Comprehensive Spending Review HMRC, like the majority of government departments, were given strict targets to meet over the next four years.

The main headlines were:

• a 15% reduction in costs required before 2015
• £900m to address the tax gap and tackle tax avoidance and evasion, bringing in an additional £7bn per year by 2014/15
• £100m to improve the operation of PAYE
• measures to deliver £8bn of tax credit fraud and error savings by 2014/15
• a five-fold increase in criminal prosecutions
• a new dedicated team of investigators to crack down on offshore evasion and
• improving the scope of in-house debt collection and placing up to £1bn per year of tax to private sector debt collection agencies.

HMRC are starting to make progress in some of these areas and have recently launched a campaign to target suspected fraudulent tax credit claims from the self-employed. According to HMRC, in 2008/09 675,000 tax credit awards (8.9%) had errors relating to income. The potential loss was £145m.

HMRC have been writing to 12,000 self-employed people who are claiming tax credits where they believe that those claims are not genuine or accurate.

This is part of a wider government crackdown and HMRC and the Department for Work and Pensions have published a strategy designed to tackle error and fraud in benefits and credits.

Exchequer Secretary to the Treasury David Gauke said:

‘HMRC is determined to take a tough approach to targeting possible fraud among tax credit claimants. Last year the Government launched radical proposals to reduce the billions lost to tax credit error and fraud every year. These losses are unaffordable and unacceptable.

HMRC will now use credit reference agencies and data-matching to spot patterns of fraud. The department is also employing additional investigators and are examining each claim in high-fraud areas.’

If you have any concerns about tax credits, please do get in touch.

Introduction »