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HMRC Loses 2.3bn in Tax Credits Last Year

According to a report by the National Audit Office (NAO), HM Revenue & Customs (HMRC) lost £2.27bn in tax credits last year

Tax officials admitted the majority of this - £1.6bn - was as a result of mistakes rather than fraudulent claims.

In 2009, 9% of tax credits were paid out when they should not have been, and HMRC said it aimed to reduce this to 5% by 2010/11.

But last year's figure was around £850m higher than this target.

It comes despite HMRC's predictions that they would cut the losses by £1.4bn. It now concedes its efforts to reduce the hit saved less than £500m.

The head of the NAO Amyas Morse, who last year refused to sign off HMRC's accounts because of tax credit fraud and error, described the tax credit system as "complicated".

Labour MP Margaret Hodge, the chair of the Commons Public Accounts Committee, said: "It set itself a target ... which it missed by a mile. I find it deeply worrying that even after HMRC has taken action, one in five claims still contain error or fraud."

Stuart Coleman, Manager of the Tax Department of ABDS comments:
“Tax credits payments are based on estimates of income, and HMRC estimates that up to £4bn of tax credit debt is unlikely ever to be recovered.”

If you need any help and advice for your business on Tax, VAT or the implications of HMRC initiatives, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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