HMRC accounts estimate £4.5bn in Covid schemes fraud

Written by Jim Dunton on 25 July 2022 in News
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Figure may be as high as £6.4bn, according to department

Credit: Micro Biz Mag/CC BY 2.0

HM Revenue and Customs has produced a revised estimate for fraud and error in its coronavirus support schemes that indicates the total will be between £3.2bn and £6.4bn – with the “most likely” figure being £4.5bn.

The figures, contained in the department’s annual report and accounts for 2021-22, combine the lifetime projections for the Eat Out to Help Out initiative, the Self-Employment Income Support Scheme, and the Coronavirus Job Retention Scheme – commonly known as the furlough programme.

The estimates are a reduction on earlier figures – which at one stage were as high as £8bn. But the level of fraud and error in the schemes is cited by National Audit Office head Gareth Davies as one of the core reasons HMRC’s resource accounts have been given qualified sign-off this year.

According to HMRC’s annual report and accounts, the cumulative net cost of the three schemes is £98.2bn, the lion’s share of which, £69.3bn, is accounted for by the furlough scheme. The report says £28.1bn was paid out through the SEISS scheme and £840m through Eat Out to Help Out.

Eat Out to Help Out has the highest-projected fraud and error rate of the three programmes, at 8.5%. The rate for the furlough scheme is given as 5.0% and 3.6% for SEISS.

In his commentary on HMRC's accounts, the NAO's Davies said that the level of estimated fraud and error in the department's Covid support schemes now reflected "direct evidence", including self-assessment tax submission data and new investigations from HMRC's random enquiry programme.


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But he warned that the estimates were “subject to considerable uncertainty” and that the actual levels of error and fraud in the schemes could differ “significantly” from the rate and values reported by the department, which include both a range and a “most likely” estimate.

He said: “The key sources of uncertainty that require significant judgement to be exercised, include: reliance on internal and external survey data where there is no direct evidence at the claim level; the availability of more current random enquiry and self-assessment return data requiring the results of earlier analysis to be extrapolated across the remainder of the schemes; and weaknesses in certain aspects of the random enquiry programme that did not find evidence of organised crime or non-payment of furlough to employees.”

Davies said that the risks may not have materialised, or could have gone undetected by HMRC.

The two other grounds for Davies’ qualified opinion on the regularity of HMRC’s resource accounts were error and fraud in corporation tax research and development reliefs and personal tax credits.

Davies, whose formal title is comptroller and auditor general, said the research and development relief schemes were complex and had “proved attractive to those seeking to abuse them”, opening up opportunities for fraud.

“HMRC’s most recent estimate shows that the level of error and fraud present in this area of expenditure is £469m or 4.9% of related expenditure,” he said.

The 2020-21 figure was £336m, or 3.6% of related expenditure.

On personal tax credits, Davies said the most-recent estimate indicated that in 2020-21 error and fraud resulted in overpayments of 5% of expenditure, the same as the overpayment rate initially reported in the previous year.

“These rates equate to overpayments of £780m from an estimated 400,000 claims, or on average, £1,950 per claim,” he said.

In an update on tackling fraud and error in the Covid support schemes, published on the same day as its annual report and accounts, HMRC said the programmes had helped millions of people and businesses through the pandemic.

“The Coronavirus Job Retention Scheme helped to pay the wages of people in 11.7 million jobs and nearly three million self-employed workers received a Self-Employment Income Support Scheme grant,” it said. “Our priority was to get vital money to people quickly, to support people, businesses and the economy. We launched the schemes at unprecedented pace: just four weeks for the Coronavirus Job Retention Scheme.”

HMRC said that as of this month the amount of money it had either blocked from being paid out in relation to the Covid support schemes because of fraud concerns or recovered through compliance activity stood at more than £1.2bn.

It added that a further £970m had been repaid, either because individuals and businesses decided they no-longer needed the money they had claimed or because they recognised an error.

HMRC said its Fraud Investigation Service had made a total of 26 arrests involving the CJRS, SEISS and Eat Out to Help Out in 2021-2022, while its Taxpayer Protection Service had opened almost 41,000 one-to-one compliance interventions as of March this year.

It said the taskforce now had 1,100 staff and was treating fraud in Covid-19 schemes as a “major priority”.

“We are not writing anything off and will continue to prioritise the most serious cases of abuse. HMRC has legal powers to recover this money up to 20 years after the event,” the department added.

HMRC said that over the course of the pandemic it had protected the livelihoods of millions of customers and ensured the tax system continued to operate – collecting a record £731.1bn for UK public services last year.

 

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