HMRC reveals new estimate for Covid fraud recovery

Three-quarters of Covid support claimed in fraud and error won’t be collected

HMRC has revealed that they expect to recover just 25% of a total £5.8bn paid out due to fraud and error in relation to the coronavirus support schemes. ¹HMRC responses to inaccurate claims, HMRC, 12 January 2022, https://www.gov.uk/government/news/hmrc-responses-to-inaccurate-claims

The latest figure has appeared in a document published on 12th January entitled “Myth Busters – HMRC’s responses to inaccurate claims” and sought to spin the figures as an achievement. Under a heading “HMRC has successfully tackled coronavirus help scheme fraud and error” HMRC explains “We recovered £500 million of overpayments in 2020 to 2021. The government then invested £100 million in a Taxpayer Protection Taskforce of 1,265 HMRC staff to combat fraud in the schemes. We expect the taskforce to recover £800 million to £1 billion between 2021 and 2023.”

This equates to a total of between £1.3bn and £1.5bn, or 22% and 26% of the amount lost to fraud and error.

The new figures appear to be a significant revision down from November last year, when Jim Harra, the head of HMRC, told the FT that the organisation will struggle to recover more than half of the losses. ²HMRC expects to recover less than half £5.8bn lost in Covid fraud and errors, Financial Times, 21 November 2021, https://www.ft.com/content/3991505c-8311-401e-aece-55342f2b07df

The published figures suggest that HMRC will be seeing up to a 10x return on investment when tackling fraud and error in the coronavirus support schemes. It is therefore difficult to understand why the department is not being given more cash to tackle the problem and instead is leaving ¾ of the money lost to fraud and error in the hands of people that wrongfully claimed it.

Recent research from TaxWatch showed that the DWP is receiving more than 2x the funding HMRC is getting to tackle fraud and error in the benefits system arising from the pandemic – demonstrating that when an issue is deemed to be important enough, the Treasury finds the money.

This research was featured in The Times, The Daily Mail, and Public Finance, among others. This then lead to Jim Harra being questioned by the Public Accounts Committee on the figures, and to an Urgent Question in the House of Commons on fraud.