HM Revenue & Customs: tax credits error and fraud - Public Accounts Committee Contents

2  The support and advice provided to claimants

6.  HMRC provides written guidance to tax credits claimants and offers support through its helpline to help them manage their claims. However, our experience from helping our constituents is of problems with the accuracy and consistency of HMRC's advice.[14] Citizens Advice has also identified inaccurate information from the tax credits helpline through a mystery shopping exercise.[15] This experience seems to be at odds with HMRC's estimates that only 2.5% of error is due to errors by HMRC officials.[16] HMRC's reporting of these figures does not appear to be consistent with the way the Department for Work and Pensions reports the breakdown of claimant error, administrative error and fraud for other benefits.[17]

7.  Providing accurate advice and support is important for both claimants and the taxpayer. Without this claimants may provide HMRC with the wrong information which in turn may lead to overpayments that HMRC will seek to recover. Some claimants find it difficult to understand why such debts have occurred and struggle to cope with the resulting repayments.[18] HMRC acknowledges that the level of tax credits debt created is significant and challenging.[19] In 2011-12 HMRC wrote off £1.7 billion in tax credits debt that it could not recover from claimants.[20]

8.  HMRC could reduce overpayments and error through providing better quality information and advice when people make a claim or report a change in their circumstances.[21] Voluntary sector organisations, such as Citizens Advice, have a great deal of knowledge of how claimants experience the tax credits system and what areas they struggle to understand. HMRC already works with the voluntary sector, but recognised that it could do more to build on this relationship and work more closely to share information at a local level.[22] HMRC's front-line staff also have expertise of claimants' experience of the tax credits system. HMRC is working to ensure that staff are supported to feedback their views of what does and does not work.[23] It is clear from the evidence we heard, particularly in regard to claimants not being able to recognise when they meet HMRC's definition of living as a couple, that guidance and support needs to improve.[24]

9.  HMRC has to make decisions on the amount of money claimants are entitled to, using the evidence it holds which may be incomplete, outdated or incorrect.[25] This leads to claimants appealing against HMRC's decision and providing additional evidence. We heard from Citizens Advice that HMRC is making retrospective decisions which should have been made when the claim was made or when a change was reported.[26] When a decision is appealed it is important HMRC deals with it quickly as during the process awards are reduced or stopped leading to people suffering financial difficulties, hardship and distress.[27] In 2011-12, around 8,000 people lodged an appeal, of which 40% were successful.[28]

10.  HMRC has increased significantly the number of tax credits claims it checks for error and fraud from 123,000 in 2008-09 to 1.6 million in 2011-12.[29] It has not, however, always considered the impact this would have on the volume of appeals it receives. For example, it took action in 2011 to identify claimants who had not told HMRC that they were in a relationship. HMRC undertook 100,000 checks to identify undeclared partners and ended 40,000 tax credits awards.[30] However, HMRC failed to put in place adequate resources to handle the subsequent increase in appeals. Citizens Advice told us that this had led to a huge increase in the number of lone parents seeking their assistance[31] and that some appeals had taken over six months to resolve.[32] HMRC accepted that it had not responded sufficiently quickly enough in these cases.[33]

14   Qq 40, 101, 133 Back

15   Q 4 Back

16   Qq 30-35 Back

17   Qq 29-30 Back

18   Q 40 Back

19   Q 40  Back

20   Q 40 Back

21   Q 1 Back

22   Qq 134-135 Back

23   Q 134 Back

24   Qq 9, 13-15 Back

25   Q 37 Back

26   Q 9 Back

27   Q 16 Back

28   Q 39 Back

29   C&AG Report, paras 2.10, 4.3 Back

30   Q 95 Back

31   Q 13 Back

32   Qq 13, 15-18 Back

33   Ev 23 Back

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Prepared 22 May 2013