23 May 2013

PAC publishes its report on tax credits: Error and Fraud

The Public Accounts Committee (PAC) has published its report on HMRC in respect of tax credits Error and Fraud. The report is very critical of HMRC's performance in several respects.

HMRC failed to meet their target to reduce Error & Fraud to 5% by 2010-11 and have advised the Treasury that they will not be able to deliver the agreed £8billion Error & Fraud reduction by 2015, looking instead to achieve £3billion. Moreover, until June 2012, HMRC were hugely over-estimating their performance against the Error & Fraud targets.

Despite increasing the number of reviews almost ten-fold, the rate of Error and Fraud detection has no more than doubled. PAC calls on the Treasury to hold HMRC account to find real savings and recommends HMRC develop a credible plan for reducing Error & Fraud in each of the main risk categories by Summer Recess

The report is also critical of the quality of HMRC's guidance and support for customers navigating such a complex system and recommends a systematic review. Against evidence supplied, PAC question HMRC's reported figure of just 2.5% HMRC-related error and comments on their failure to plan adequately for appeals, especially in view of the increased intervention rate and subsequent increase in appeals that work has triggered.

If HMRC take a step back and consider the report conclusions and recommendations, they will see that b, they  etter understanding around customer behaviour and better customer education are key to addressing many of the concerns. HMRC response to the report is here