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HMRC yet to make sustainable cuts to fraud and error
HMRC are still not achieving value for money from tax credits, having failed to effectively manage losses from fraud and error, according to a report from the National Audit Office (NAO).
The Revenue announced in 2009 its aim to tackle the issues so that they would account for just 5% of losses by 2010/11 – but the department missed the target by more than three percentage points worth around £850m.
A sustainable reduction has yet to be made, notes the new NAO document, although the taxman has made improvements to the approach for combating dishonesty and inaccuracy in the tax credits system.
Since the beginning of their initiative, HMRC have increased the number of checks on claims, targeted those at greatest risk of presenting problems, and increased by 400 to 1,500 the number of front-line staff members involved in checking.
But the 2010/11 savings made by the department’s preventative measures were overestimated by officials, who were forced to revise their figure from £1.4bn to £480m, and “there remain a substantial number of incorrect awards at the end of each year”, reports the NAO.
The Revenue’s approach during 2011/12 has improved through the better use of data analysis, but the outcome of the work cannot be fully assessed until the next set of figures is available in the summer.
“The tax credit system is complicated, and HMRC will have to overcome significant challenges if they are going to achieve value for money,” said NAO head Amyas Morse.
“HMRC deserve credit for demonstrating innovation, but they further to go to achieve sustainable reductions… To tackle error and fraud effectively, there needs to be an improved understanding of risks and better use of information.”
