MPs have issued a damning report stating that the UK tax authority’s decision to close its task force aimed at recovering fraudulent and faulty claims made on the government’s Covid-19 support schemes is putting up to £5.1bn of taxpayers’ money at risk.
The House of Commons public accounts committee, which is cross-party, expressed concern that the closure of the taxpayer protection task force would result in insufficient attention being given by HM Revenue & Customs to the billions of pounds lost in fraudulent and erroneous claims.
The committee revealed that HMRC estimated between £2bn-£5.1bn of fraudulent and faulty claims on three Covid schemes, including 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.
The committee stated in its report that it would be unacceptable for HMRC to write off such a large amount of taxpayers’ money. Dame Meg Hillier, who chairs the committee and is a member of the Labour Party, expressed concern that “bad actors” in British business were circumventing the tax authority, and that the weak recovery effort would not discourage potential future criminals. She added that too many companies had claimed funds they were not entitled to and were now refusing to return them.
In 2021, the government invested £100mn in a taxpayer protection task force, employing over 1,000 staff, to recover the billions of pounds lost through Covid support schemes managed by HMRC. However, in January, the tax authority acknowledged that the unit had not provided value for money and disclosed plans to shut it down in September this year.
According to the committee’s report, the task force is predicted HMRC to recover between £525mn and £625mn.
The committee criticized HMRC’s “woeful” performance in recovering £2.3bn that had been incorrectly paid to employers claiming furlough payments for staff who continued to work. By March 2022, the agency had only secured £640,000, which is just 0.03% of the money that was claimed incorrectly.
The report also stated that HMRC could have gathered more evidence on risky claims through visits and interviews. The committee also criticized HMRC for pursuing a relatively small number of criminal investigations into fraudulent claims. While HMRC had opened 50,000 civil cases for fraud across the Covid schemes by October 2022, it had launched just 31 criminal investigations by November 2022.
The committee noted that employers who had overclaimed furlough grants were unlikely to be penalized if identified by HMRC’s compliance teams, which would result in them having little incentive to voluntarily repay the grants. The committee urged the agency to increase the number of criminal investigations into employers.
The Treasury, on the other hand, declared its commitment to addressing errors and fraud across the Covid schemes and assured that it would not write off anything when the task force is dissolved.
The government announced that the total amount of money that HMRC had either blocked from being paid out or had recovered since the inception of the schemes exceeded £1.2bn. It added that the schemes had reduced fraud and errors without delaying payments to those who desperately needed them.
