Tax credit errors still in the £billions
HMRC have published statistics on fraud and error in tax credit calculations for the year 2006/07. Figures for both are down but the report should still make sobering reading for anyone claiming tax credits, and for agents who may consider advising clients to claim.
Levels of fraud have been reduced from 2005/06 but still represent some £40m fraudulently claimed in around 10,000 awards. More worryingly, levels of error in favour of the claimant – resulting in the dreaded “clawback” – are still at around 7.6% of total finalised claims. Again, this is down from 9.3% in 2005/06 but still represents nearly £1.4bn worth of errors spread over around 830,000 awards. Estimated errors favouring HMRC are substantially lower.
Further figures show that the vast majority of errors which result in either over or underpayments of tax credits are made by claimants rather than HMRC. This underlines the complexity of the claim system even for claimants with access to professional advice – which, as any agent who has tried to speak to the Tax Credits Office on a client’s behalf will know, cannot be applied directly to a claim process. It is perhaps surprising to learn that by far the most frequently miscalculated or mis-stated item on the tax credit claim form which results in over and underpayments is income level – surely one of the simpler elements of the tax credit application process.
The government has now set HMRC a “challenging” target to reduce the total level of both fraud and error in the tax credits system to no more than 5% by March 2011 – challenging indeed, as it means reducing current levels by over a third. Expect tax credit officials to clamp down and perhaps demand more evidence to support claims.