HMRC hits back over claims it is soft on fraud

A claim by a committee of MPs that HM Revenue and Customs (HMRC) looks "soft on fraud" has been met by a robust response by the tax authority.

Inaction over tracking down fraudulent claims for Covid support risked "rewarding the unscrupulous", the Public Accounts Committee (PAC) said.

But HMRC said that it rejected many of the statements in the PAC report.

Treasury minister Lord Agnew recently resigned over what he called schoolboy errors relating to Covid grants.

He said that there had been woeful efforts to stop abuse of pandemic support schemes.

The PAC report into the performance of HMRC suggested the tax authority was already facing challenges from Brexit and modernising the tax system before the pandemic.

While MPs said it had done well in setting up and operating Covid response schemes, the knock-on effect had been "poor performance, delays and backlogs in key aspects of tax administration". This included a decline in customer service.

Meanwhile, the department now faced tackling "an avalanche of error and fraud" on Covid scheme payments.

Meg Hillier, who chairs the committee, said the committee was concerned about how long it would take for the tax authority to catch up.

"The level of fraud and error in furlough that employers will get away with is a real concern. What signal does it send when HMRC rolls over on billions of pounds of fraud and error directly related to Covid support packages? With the current parlous state of the public finances we can ill-afford to be so cavalier over so much taxpayers' money," she said.

"Every taxpayers' pound lost to a fraudster will lead to honest ordinary people feeling the post-pandemic pinch harder and harder."

The committee said that the cost of error and fraud in Covid schemes was £6bn, and HMRC's plan - even if successful - gave the impression it would fail to recover £4bn of that money.

The government had already disputed that it had written off £4.3bn of loans, and HMRC said that nothing had been written off.

"While we acknowledge lessons that need to be learned in this report, we reject many of the statements made by the PAC. No fraudulent payments have been written off and we are taking action on multiple fronts to recover overpayments," a spokesman said.

"The vast majority of payments in the schemes were made correctly to employers, and most error and fraud was legitimate claimants making mistakes or inflating their claims, often small amounts per case.

"Our Covid support schemes were implemented at unprecedented speed to protect millions of jobs and businesses at a time when families needed it the most."

HMRC also rejected criticism of its customer service, saying the services were maintained "while delivering the Covid support schemes, the UK's smooth transition from the European Union and the essential services that keep the tax system running".