Closure of HMRC unit puts £5bn of taxpayers’ money at risk, warn MPs

The UK tax authority’s decision to shut its task force focused on recouping fraudulent and faulty claims made on the government’s flagship Covid-19 support schemes is putting at risk up to £5.1bn of taxpayers’ money, according to a damning report by MPs.

The cross-party House of Commons public accounts committee said on Wednesday it was “concerned” that HM Revenue & Customs’ plan to close its taxpayer protection task force would lead to the agency giving “too little attention” to the billions of pounds lost in fraudulent and erroneous claims.

HMRC estimates between £2bn-£5.1bn of fraudulent and faulty claims on three Covid schemes administered by the agency — the furlough scheme for company workers, the support programme for the self-employed and the “eat out to help out” meal subsidy initiative — are likely to remain unrecovered by 2023-24, according to the committee.

“It would be unacceptable for HMRC to write-off such a large amount of taxpayer’s money,” added the committee in its report.

Dame Meg Hillier, Labour chair of the committee, said “bad actors in British business are running rings around the Revenue . . . the weak recovery effort will fail to deter potential future criminals. Too many companies claimed that shouldn’t have and now won’t give it back”.

In 2021, the government invested £100mn in its taxpayer protection task force, with more than 1,000 staff, to try to recover the billions of pounds lost through the Covid support schemes administered by HMRC.

The tax authority admitted in January the unit had not proved value for money and announced plans for its closure in September this year.

The task force is currently predicted by HMRC to recover between £525mn and £625mn, according to the committee’s report.

The committee singled out HMRC’s “woeful” performance in recovering £2.3bn incorrectly paid to employers claiming furlough payments for staff who continued to work.

By March 2022, the agency had secured only £640,000 — equivalent to just 0.03 per cent of the money claimed incorrectly.

The committee report said: “HMRC could have done more to collect evidence on risky claims through visits and interviews.”

It also criticised HMRC for pursuing relatively few criminal investigations into fraudulent claims.

HMRC had opened 50,000 civil cases for fraud across the Covid schemes by October 2022, but just 31 criminal investigations by November 2022.

“Employers who had overclaimed furlough have little incentive to voluntarily repay grants as they are unlikely to be penalised if identified by HMRC’s compliance teams,” said the committee, urging the agency to increase the number of criminal investigations into employers.

The Treasury said it was committed to tackling error and fraud across the Covid schemes and would not write anything off when the task force closes.

It added the total amount of money HMRC had either blocked from being paid out, or had recovered since the start of the schemes, amounted to more than £1.2bn.

The government said: “These schemes limited fraud and error, without delaying payments for those in desperate need of them.”