HMRC not going back to private sector for tax credit checks after Concentrix row

Comes after supplier Concentrix "consistently failed to achieve more than half of its performance targets" during first year of its tax credit checks contract

By Civil Service World

17 Jan 2017

HMRC will be keeping its tax credit fraud and error checks in-house, it has told the National Audit Office, after axing its controversial contract with private supplier Concentrix.

The tax authority signed a three-year deal with Concentrix in 2014, and the US giant was tasked with investigating tax credit claims in a bid to reduce fraud and overpayment in the system.

But the deal was brought to an early end last November after an outcry from MPs and the public over concerns that Concentrix had incorrectly stopped claimants' tax credits, in some cases leaving them in serious financial hardship.

HMRC confirms early end to Concentrix tax credits contract
Concentrix row: HMRC chief Jon Thompson hints at early end to troubled tax credits contract
Tax credits problems “bigger than Concentrix”, HMRC chief Jon Thompson tells MPs

A new report by the NAO finds that Concentrix "consistently failed to achieve more than half of its performance targets" between November 2014 and September 2015, meeting just 104 of 242 monthly performance indicators agreed with HMRC under its payment-by-results model over this period.

Despite this, the spending watchdog said Concentrix renegotiated a higher rate of commission in October 2015, with the new rate entitling it to 11% of the savings made through the deal, up from 3.9% in the original agreement.

The NAO said HMRC used that renegotiation "to strengthen the incentives for improving Concentrix’s customer service", and ultimately cut the supplier's commission payments by £3.5m, making use of the service credits for customer service failure built into the revised deal.

HMRC originally estimated that the three-year deal with Concentrix would net £1bn in savings through reductions in fraud and overpayment. But the NAO found that the final savings on the aborted contract were just £193m.

Overall, the tax authority paid the supplier £32.5m, including more than £23m in commission.

Concentrix told the NAO it ended up making a loss of more than £20m on the contract, and HMRC has now told the spending watchdog that it "will not replace Concentrix with a third-party provider" after judging the fraud and error checks model to be too risky.

"HMRC told us it had concluded that the risks of a third-party arrangement to customer service outweighed the benefits, notwithstanding the ‘net positive’ savings against costs it reports," the NAO said.

A Concentrix spokesperson said the firm "welcomed the opportunity to engage with the National Audit Office in its inquiry".

"This was a hugely complex contract and programme, and as the report highlights, a number of issues emerged at the outset which laid the foundations for the challenges experienced throughout, particularly last year. We look forward to discussing the report with the Public Accounts Committee in order to ensure all lessons can be learned."

An HMRC spokesman said: "We apologise to all those who did not receive the standard of service that they should have."

Read the most recent articles written by Civil Service World - Perm secs round-up 2023: Looking back to look forward

Share this page