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The UK tax authority has almost halved the amount of money it expects to recover following fraud and false claims on some of the government’s flagship Covid support schemes, including the furlough programme.
Jim Herra, head of HM Revenue and Customs, said on Wednesday that HMRC expects to recover £1.1bn arising from fraudulent and faulty claims on the coronavirus job retention scheme, the self-employed income support scheme and the “eat out to help out” scheme. Earlier the aim was to secure £2bn.
HMRC, which paid companies and individuals under three schemes, estimated last year that £5.8bn was lost through fraudulent and false claims. This year it reduced that figure to £4.5bn.
The authority set up a task force with more than 1,200 staff after receiving £100mn in government funding last year to tackle fraud and faulty claims.
Giving evidence to the House of Commons Treasury Select Committee, Hara said one of the reasons for reducing the amount he expected to recover to £1.1bn was the larger number of minor cases than originally forecast.
“We initially estimated that we would take 30,000 cases, it is now approaching 50,000,” Hera said.
He added that in 2020, exits to help support the hospitality industry, which provided meal subsidies, had the highest proportion of fraudulent claims, estimated at 9.5 percent.
Once the task force ends in 2023, HMRC will absorb its efforts to recover losses caused by fraud in the authority’s general compliance work.
Meanwhile, Herra was questioned by MPs about why HMRC was failing to close the “tax gap” arising from tax evasion – the difference between the amount of tax collected from individuals and companies and the amount owed. The gap has been around £5bn a year for the past five years.
Hera said that “broadly speaking” most of the tax evasion came from small businesses that did not declare all of their income.
He added that HMRC’s new digital system for tax collection would help reduce errors made by taxpayers and enable the authority to focus its efforts on reducing tax evasion.
Chancellor Jeremy Hunt’s Autumn Stateman has allocated £79mn of extra funding to HMRC to help it tackle more cases of serious tax fraud, particularly among wealthy individuals.
Hera said the so-called debt balance – the total amount of tax owed by individuals and companies – rose from £42bn in August to £46.9bn in September. He added that the increase in debt was “especially among small businesses”.
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