The UK tax authority has almost halved the amount of money it expects to recover following fraudulent and erroneous claims on some of the government’s flagship Covid support schemes, including the furlough programme.
Jim Harra, head of HM Revenue & Customs, said on Wednesday that HMRC expects to recover £1.1bn arising from fraudulent and faulty claims on the coronavirus job retention scheme, self employed income support scheme and “eat out to help out” scheme — having previously had a goal of securing £2bn.
HMRC, which made payments to companies and individuals under the three schemes, last year estimated that £5.8bn was lost through fraudulent and erroneous claims. This year it revised that figure down to £4.5bn.
The authority set up a task force with more than 1,200 staff after last year receiving £100mn in government funding to pursue fraudulent and faulty claims.
Giving evidence to the House of Commons Treasury select committee, Harra said one reason for reducing the amount it expected to recover to £1.1bn was a larger number of smaller cases than originally predicted.
“We initially estimated that we would take up 30,000 cases, it’s now approaching 50,000,” said Harra.
He added that eat out to help out, which provided a meal subsidy to support the hospitality industry in 2020, had the highest proportion of fraudulent claims, estimated at 9.5 per cent.
Once the task force winds down in 2023, HMRC will absorb its efforts to recover losses owing to fraud into the authority’s general compliance work.
Meanwhile, Harra was questioned by MPs about why HMRC has failed to close the “tax gap” arising from evasion — the difference between the amount of tax collected from individuals and companies and the quantity owed. The gap has remained at about £5bn per annum for the past five years.
Harra said “broadly speaking” a lot of the tax evasion came from small businesses not declaring all of their income.
He added HMRC’s new digital system for tax collection should help to reduce mistakes made by taxpayers and enable the authority to focus its efforts on reducing tax evasion.
Chancellor Jeremy Hunt’s Autumn Statemen allocated £79mn of additional funding to HMRC to help it tackle more cases of serious tax fraud, particularly among wealthy individuals.
Harra said the so-called debt balance — the total amount of tax owed by individuals and companies — rose from £42bn in August to £46.9bn in September. He added the debt rise was “particularly among small businesses”.