Increase in fraud and errors in tax credits system

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The level of fraud and error in the tax credits system has risen to 8.6%, figures released by the Treasury showed today.

Despite HM Revenue and Customs being set a target to cut the rate to 5% by 2011, a survey of 4,100 cases found it went up last year from 7.8%.

In a statement, Treasury Financial Secretary Stephen Timms said HMRC was taking action to reduce fraud and error and "will use the analysis published today to refine its strategy further".

Detailed figures released by HMRC showed the 8.6% figure, which covers the 2007/8 financial year, was the lowest estimate of a range which put the level at up to 10.6%.

That equates to between £1.75 billion and £2.12 billion, of which up to 50,000 cases of fraud accounted for between £100 million and £200 million.

Mr Timms said HMRC had introduced "additional checks and interventions tailored to help prevent error entering the system whilst ensuring those who abuse the system are caught".

"HMRC has also been embedding this deeper understanding of customer behaviour into its entire compliance programme, deploying resources to areas of greatest risk," he told MPs in a written Commons statement.

"By helping customers to get their claim right from the outset, and to keep their award on track, HMRC is reducing the risk of loss and improving customer service."

Anti-fraud issues included tighter control on the issue of claim forms, fraud awareness training for staff, deploying compliance officers in call centres and intelligence sharing across Whitehall, he said.

Those caught faced a fine and possible prosecution, he said.