HMRC under fire agai

THE TAXMAN has missed its targets on tackling tax credit fraud and error "by a mile" after National Audit Office findings showed it had cut losses by £500m over two years, instead of £1.4bn as hoped, reports small business accountants Harris & Co.

Labour MP and Public Accounts Committee chair Margaret Hodge (pictured) branded the figures "deeply worrying", urging HM Revenue & Customs to "get a grip".

In 2009, HMRC set itself the target of pushing the rate of tax credit fraud and error down to 5% from 9%, re-allocating around 400 staff to do so.

However, the NAO noted the rate had only dropped to 8.1% and some £2.27bn had been leaked through fraud and error since 2010/11, adding HMRC had "overestimated the impact of its activities".

The NAO report found the department"s strategy had prevented an extra £230m of tax credits being wrongly paid out, highlighting "innovative" steps taken which have begun to glean results.

There had not been much progress in the development of an effective response to stop error and fraud recurring after a claim has been corrected, it said. Nor had enough headway been made in addressing people who failed to declare their partner"s income or in checking claimant"s stated work hours. The result, it said, was the overpayment of one in five claims.

Head of the NAO Amyas Morse - who last year declined to sign off HMRC"s accounts due to tax credit fraud and error - said the body faces "significant changes if it is going to achieve value for money".

He said: "HMRC deserves credit for demonstrating innovation, but it has further to go to achieve sustainable reductions in tax credits error and fraud. To tackle error and fraud effectively, there needs to be an improved understanding of risks and better use of information."

Hodge was more critical, noting HMRC had "set itself a target... which it missed by a mile", adding the department has to "get a grip".

She did, however, welcome "inroads into tackling some categories" and acknowledged HMRC "has tried to be smarter and sharper".

"HMRC needs to develop a rigorous plan for rooting out error and fraud in each and every category if it is to achieve a sustainable reduction in losses", she said.