HMRC to Miss Tax Credit Fraud Target, says PAC

In 2010 the government challenged HM Revenue and Customs (HMRC) to cut fraud and error by £8bn by 2015. The predictions of the Public Accounts Committee point out that the sum will be reduced by £3bn. Can you imagine how many legal documents you can buy with this amount of money?

A new point in the tax credit system proposes that parents returning to work should get financial support.

There will be a complex system taking into account age, income, hours worked, number and age of children, childcare costs and disabilities, which will allow low-income families, apply for tax credits. HMRC has to be aware of the changes in family circumstances.

It turns out that the claimant cannot totally understand the system and HMRC has many problems with its administration.

The results from the latest figures show that one in five awards featured an error or fraud; £1.7bn of these overpayments was written off because claimants did not intend to pay it; in 2010-11- £2.3bn was lost to fraud and error; the 2015 target will be missed by £5bn.

The committee advised HMRC to improve the information it gives to claimants in letters and through its helpline, and also check more carefully the information received back.

This increased the number of checks made by HMRC and respectively the number of appeals after payments were reduced or cancelled.

Many experienced financial hardship due to delays of six to eight months.

A spokesman for HMRC said that extra checks had saved £390m and helped the accurate usage of information.

“We are also getting tougher with claimants about the proof they need to support their claims; for example on childcare costs and on school leavers,” he said.

 

HMRC vs. the Public Accounts Committee – Round 1

HMRC needs to think about new, tougher measures for businesses, which fail to pay tax in the UK. They are called upon to do it by MPs from the Public Accounts Committee. The current line raised some concerns, due to the recent tax avoidance schemes applied by major multinational companies, such as Amazon and Google, which have paid small tax to the UK, regardless of the huge turn over they have made.

As we have already announced, tax avoidance schemes seem to be very common among multinational companies. A great example is Starbucks for example. According to the researches they have made over #400m in the UK, however as they pay royalties to a sister branch in the Netherlands, for using the brand, they paid no corporation fee in the UK, despite the huge turnover.

After revealing the schemes, a number of other big companies have come under heavy fines. HMRC was criticised for failing to manage the case and ensure the companies pay what they are required to pay in the UK.

“These global companies are making money in the UK,” said Margaret Hodge, chairwoman of the Public Accounts Committee. “All we are saying is that if you have economic activities in the UK you are making profits and tax is payable on that.”

She says that the HMRC should be more “aggressive and assertive”, when it comes to fighting tax avoidance schemes, which might hurt the UK economics.

On the other hand, the HMRC replied back that all multinational companies with UK branches, pay the tax with accordance to the current laws.

Despite this, however, Chancellor George Osborne is set to announce details of a £154m fund intended to assist in dealing with tax issues relating to the affairs of large corporations and wealthier people.