2 CLAIMANT ERROR AND FRAUD
14. Tax Credits carry the risk of fraud through claimants
providing false information, for example understated or undeclared
income, fictitious children or misrepresented childcare. The Department's
most recent estimates of error and fraud by Tax Credits applicants
were prepared in 2003. That work indicated an error rate of between
10 and 14% by value. The Department told us in December 2003 that
it expected error rates to be halved by the introduction of New
Tax Credits in April 2004.
15. Our predecessor Committee's Report of April 2004[26]
concluded that the level of errors caused by claimant error and
fraud in tax credit payments was unacceptable and recommended
that the Department should take all necessary steps at least to
halve the error rates. They recommended that the Department should
make comprehensive cross checks to other departmental information
sources, set quantified targets and timescales for further reductions
and report performance against these targets.
16. At the Committee hearing on 24 January 2005 the
Department could not provide any quantified estimate of the level
of claimant error and fraud for New Tax Credits in 2003-04[27]
and explained that it would not be able to do so before July 2005,
after all claimants had confirmed their circumstances. The Department
had undertaken some work on the provisional awards for 2003-04,
but it could not make reliable quantified estimates from this
work.[28]
17. The Department said that in undertaking in December
2003 to halve error rates, it must have assumed that certain tools
would be available which had not materialised.[29]
The Department could not say whether it would ever get errors
below 5%[30] but undertook
to provide this Committee with an update on these issues by July
2005. That document is included in the written evidence with this
Report.[31]
26 14th Report from the Committee of Public
Accounts, Inland Revenue: Tax Credits (HC 89, Session 2003-04) Back
27
Qq 7-8, 10 Back
28
C&AG's Report, para 2.25 Back
29
Q 104 Back
30
Q 12 Back
31
Ev 23-26 Back
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