HMRC bungles costing the taxpayer vastly more than benefit fraudsters

Spend too long watching Channel 5 documentaries or reading certain newspapers and you can end up thinking that the UK is full to bursting point with people doing nothing all day but sitting around watching TV and fraudulently claiming benefits. The thing is, shouty headlines about “benefits cheats” and documentaries about the seedier side of life in the nation’s towns and cities sell newspapers and attract viewers.

It is an illusion that bodies like the DWP and HMRC are only to happy to propagate. After all, if there is money leaking out of the system somewhere, it makes sense that it must be disappearing into the pockets of all those cheats and scroungers that are lurking around every corner. The truth, however, would perhaps make an even more interesting TV documentary, if only someone would take the time to make it.

Losses are significantly lower than 10 years ago

Last month, HMRC finally got around to publishing the estimated statistics on benefit fraud and error relating to child tax credits for the 2016/2017 tax year. And the figures make intriguing reading.

If you don’t feel like poring through the 22 page report in detail, nobody will blame you for that, but here are some of the highlights. On Page 4, the HMRC shows that the total losses in errors and fraud come to £1.32 billion. That sounds like a lot of money, which is exactly what it is.

However, it only represents 4.9 percent of the total tax bill. Compare that with ten years ago, when the figure stood at around nine percent, and you can see that the amount of money leaking out of the system is reducing significantly.

However, it is when you get to page seven, that things really start to get interesting.

HMRC mistakes are the biggest drain on revenue

“Error and fraud” are interesting terms in themselves. The official report is a little vague as far as definitions go, but essentially it seems that if HMRC have done something wrong, it is an error. If the claimant fills out a form incorrectly, that is fraud.

The report says that of the £1.32 billion mentioned above, more than £1 billion was as a result of overpayments made by HMRC in error. Fraud, as defined by HMRC was £280 million.

In other words, errors cost around four times as much as all the fraud cases put together.

DWP is not much better

So much for the tax credits, but what about all the fraudulent claims for housing benefit, disability and so on? Check out the figures reported by the DWP a month earlier, and while it is less of a horror story for them than for HMRC, the figures still tell an interesting story.

They split the losses into three categories: Fraud, claimant errors and DWP errors. For Jobseeker’s Allowance overpayments, it shows overpayments representing 6.3% of the total – this amounts to £110 million. Of that, £70 million was in fraudulent claims, while £35 million was in official errors.

So who is causing the biggest drain on resources?

Arguably, HMRC are causing more problems than they are solving when it comes to money being lost from the public coffers. £1 billion per year lies firmly at their door, a figure that dwarfs losses incurred through fraud or, indeed, DWP errors.

Yet while that might give us a certain feeling of self-righteousness, and reassurance that we are not such a bad bunch as the tabloids like to suggest, it probably doesn’t help if you’ve just received a letter from either HMRC or the DWP to say you are under investigation.

If that does happen, remember you’ve got Hylton Potts in your corner. We deal with these people day in day out, so that you don’t have to. So pick up the phone and give me or a member of the team a ring on 020 7381 8111. Alternatively, you can email us at

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