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LITRG suggests HMRC should focus on reducing tax credits errors – their own and those of claimants’ – as well as tackling fraud.

Introduction

The Public Accounts Committee report on ‘HM Revenue & Customs: tax credits error and fraud’ was published on 22 May 2013. Ahead of the report’s publication Anthony Thomas, Chairman of the Low Incomes Tax Reform Group, commented on HMRC having stepped up their investigations into tax credit claims.

LITRG view

LITRG has long contended that a common failing of such investigations so far has been a one-size-fits-all approach which tends to ignore the subtleties of a highly complex system, leading to far too many claimants being deprived of entitlements which are rightfully theirs.

Focus on both fraud and error

Of the total amount attributable to ‘fraud and error’ in tax credits, about two-thirds is accountable for by error, one-third by fraud. Yet HMRC’s strategy is almost exclusively reliant on anti-fraud measures. A more productive approach, and one that would enable HMRC to achieve its targets more effectively, would be to devote more resources to educating claimants to avoid error in the first place.

HMRC must also pay more attention to analysing where they themselves make mistakes in administering the system (official error), a problem about which they remain in denial.