HMRC expects to recoup only a quarter of £6bn lost to Covid fraud and error

Department revises down estimate of taxpayers’ money it could get back by March 2023
Photo: Howard Lake/Flickr/CC BY-SA 2.0

HM Revenue and Customs expects to recover only a quarter of the money lost to fraud and error across several Covid support schemes by March 2023, it has said.

The department admitted it projects recovering a maximum of £1.5bn by the end of the next financial year in a document intended to rebut “myths, misconceptions and inaccurate stories or claims” about the department, published last week on GOV.UK.

The figures mean HMRC has significantly revised down the amount it expects to claw back from the Coronavirus Job Retention Scheme, the Self-Employment Income Support Scheme and the Eat Out to Help Out scheme, which it administered earlier in the pandemic.

The £1.3bn to £1.5bn it expects to recoup is significantly less than the £2.3bn HMRC permanent secretary Jim Harra said in November that his department expected to hit.

HMRC’s latest release says it recovered £500m of overpayments in 2020-21, and that it expected its 1,265-strong Taxpayer Protection Taskforce to recover between £800m and £1bn more by the end of 2022-23.

The release says nothing about plans to recover the remaining sum – between £4.3bn and £4.5bn.

However, in his November interview with the FT, Harra said HMRC "will not be able to recover it all" and said the tax agency's plans to claw back the cash did not go further than 2022-23.

"You will reach a point of diminishing returns in terms of good use of resources," he said.

The prime minister's official spokesperson refused to deny that the Treasury could write off the missing cash after that date.

Asked about the figures, they said: "We introduced these unprecedented Covid support schemes at speed to protect jobs and livelihoods. The result of the action is that the economy is back to pre-pandemic levels, and we are the first major European economy to report that."

The latest estimate of fraud levels is that 8.7% of the money paid out through the Coronavirus Job Retention Scheme was lost to fraud and error, as well as 2.5% on the first three phases of the self-employment support scheme, and 8.5% in Eat Out to Help Out payouts. The figures are “in line with the original planning assumptions that informed the design of the schemes”, HMRC said.

HMRC also said it had been clear from the beginning of the schemes that they “would be targets for fraud and that customers would make mistakes”.

“Robust measures” put in place to control error and fraud in the support schemes had “delivered results”, it said.

The National Audit Office has said HMRC could have done more to prevent money being overpaid because of mistaken or fraudulent claims.

It added that customers had returned £650m in grants they no longer required, and repaid more than £350m to correct mistakes without HMRC’s intervention, largely through its online disclosure facility.

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