HM Revenue and Customs has been “cavalier” in its rollout of a crackdown on fraud and error in Child Benefit payments, the chair of parliament’s influential Treasury Select Committee has said.
Dame Meg Hillier’s comments come after HMRC permanent secretary John-Paul Marks confirmed the department had “streamlined” the programme – which went live in August – removing parental-earnings checks that had been present in a pilot last year.
According to its latest annual report and accounts, the department paid out £13.3bn in Child Benefit in 2024-25, supporting around 11.9 million children from almost 7 million families. However, the report estimated a fraud-and-error rate of 2% in those payments, equating to roughly £270m.
HMRC is aiming to prevent £355m in fraud and error related to Child Benefit payments over the next five years, according to the annual report and accounts.
A pilot last year removed 2,600 people who had left the UK but continued to claim from the Child Benefit system. The project, run by just 15 investigators, stopped £17m of wrong payments in less than 12 months.
In last year’s Autum Budget, HMRC was awarded funding to scale up its Child Benefit and Childcare Services fraud-and-error operations with 180 new staff being drafted in. It expects the expansion to deliver a net saving of £355m by 2029-20. Methods include using international travel data supplied by the Home Office to identify children and families who have been out of the UK for long enough to end their entitlement, as well as cross-matching student loans and other benefits data.
The new checks regime went live in August this year and as of the end of last month 23,794 customers had a “compliance enquiry” opened in relation to their Child Benefit, pausing payments as part of the process.
In recent weeks, stories have emerged of people who had taken short holidays with their children having their Child Benefit stopped. Recipients being out of the country for eight weeks or more would be the usual cut-off point.
Some reports suggested that travel data supplied by the Home Office had failed to pick up instances of Northern Ireland residents leaving the UK from Belfast but returning home via the Republic of Ireland.
More than 3,600 of the Child Benefit cases that were suspended since August have now been reinstated, according to HMRC.
In a letter to members of the Treasury Committee published today, HMRC permanent secretary Marks said that while last year’s pilot had used Pay As You Earn tax data from parents to cross-reference whether a family is still in the UK and economically active, the scaled-up version of the crackdown did not in its initial phase.
“In expanding the process over the past few months, a check of HMRC PAYE systems to look for continuing UK employment was excluded in order to streamline the process, with a view to employment status being tested as part of any subsequent customer enquiry,” Marks said.
The perm sec added that it would be “disproportionately operationally intensive” to provide figures for how many of the 3,600-plus claims had been restored because of a subsequent PAYE check.
Marks said that a decision to reinstate the employment check for all cases had been taken at the end of October. He added that further changes to "strengthen the process" for the crackdown would mean that no Child Benefit claims are suspended at the outset of an enquiry based solely on international travel data and a PAYE check.
Under the revised process, customers will be “given at least one month to evidence their entitlement” when a query is raised, and a further month to respond before a decision to terminate payments is considered.
Marks’s letter contained a recognition that the rollout of the crackdown had caused some valid claims to be suspended.
“I acknowledge that the manner in which we expanded our compliance controls to protect taxpayers from error and fraud impacted some of our customers, and I am sorry for this,” the perm sec said.
Treasury Committee chair Hillier said shortcomings with the processes that HMRC introduced in August meant that 15% of people flagged as potentially non-compliant in relation to their Child Benefit clams had now had their payment restored.
“HMRC is absolutely right to look at innovative ways to fight fraud and error in our system,” she said.
“I’m afraid, though, that it appears they have been cavalier with people’s finances, making the arbitrary decision to remove necessary checks and causing a mess they are now forced to clean up.
“I understand they must try to remove any unnecessary bureaucracy within their processes but this is a costly error. It is right that they have apologised. When they next appear in front of our committee, in the new year, we will certainly be pressing them on the lessons they have learned from this mistake.”
Marks’s letter to the committee also confirmed that in future HMRC would exempt people in Northern Ireland from some elements of the international-travel checks.
“We have also introduced an upfront check to identify customers from Northern Ireland whose exit from the UK was to the Republic of Ireland and will not issue enquiries on these customers as part of this exercise,” he said.