Covid fraud taskforce ‘not best value’ for UK taxpayers, admits HMRC

The UK tax office has admitted that chasing Covid-19 support scheme fraud is not proving to be value for taxpayer’s money, ahead of the closure of a special unit set up to tackle criminals who exploited financial aid on offer during the pandemic.

The government invested £100mn in a Taxpayer Protection Taskforce, set up in 2021, to recover billions lost through Covid financial aid schemes administered by HM Revenue & Customs.

A letter from Jim Harra, chief executive of HMRC, released by the Treasury select committee on Tuesday, said that keeping the taskforce beyond September 2023 “does not provide the best value for the taxpayer”. But, he added, that the rate of return was expected to diminish over time.

The letter to Harriett Baldwin, chair of the committee, was sent in response to questions at a recent session. Harra said the current return on investment was £0.25mn per full-time equivalent taskforce officer, significantly lower than for “business-as-usual” tax compliance work, around £1.3mn per person.

The Financial Times on Monday revealed that billions of pounds of tax had gone uncollected in the UK because almost 2,300 HMRC tax compliance staff have been transferred to Brexit and Covid-19 schemes.

Victoria Atkins Treasury minister, confirmed that £30.7bn had been recovered through compliance efforts in 2021-22, compared with £36.9bn in 2019-20, the year before the pandemic fully hit, in response to ministerial questions.

The letter confirmed estimates of a total value of error and fraud of £4.5bn — or 4.6 per cent of the total net cost — from the coronavirus job retention scheme, the self employed income support scheme and the eat out to help out scheme.

Harra’s letter added that HMRC remained committed to tackling error and fraud in the Covid support schemes “where this is the most cost-effective use of resources, and we are not writing anything off”. 

HMRC expects to recover £1.1bn before the taskforce comes to an end in September 2023, or about a quarter of the most likely estimate of losses to error and fraud.

Claimants of Covid support had returned about £970mn in grants that were no longer required or where they had identified an error, Harra said.

The letter also said that HMRC had made 10 referrals to the Independent Office for Police Conduct, the police complaints watchdog, where a customer had taken their life following a tax office investigation.

Eight investigations into the incidents had concluded and there was no evidence of misconduct by any HMRC officer, it said, with two inquiries ongoing.

In separate correspondence published by the Treasury select committee, the government revealed that it had paid out £87mn in January 2022 in a guarantee provided to lenders for a development of 3,000 new homes near Aberdeen that went into administration.

The guarantee was provided in March 2016 as part of the UK guarantees scheme, which supported private investment into UK infrastructure projects.

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