Covid fraud: £3.5bn could be lost from pandemic support schemes

Cost of Covid fraud: A whopping £3.5bn could be lost from pandemic support schemes due to scams and error, figures show

  • HM Revenue and Customs is expected to claw back just £2.3bn in 18 months 
  • HMRC’s Taxpayer Protection Taskforce has already recovered £800m of funds
  • With a deadline of March 2023, it is thought £3.5bn will be left outstanding 
  • The taxman is also facing problems in handling the rise in debts as businesses and individuals struggled to pay their taxes throughout the pandemic 
  • The taxman expects to recover less than half of the £5.8billion paid out in error or through fraud under three pandemic support schemes.

    The chief executive of HM Revenue and Customs said that in 18 months’ time a task force set up to recoup the money is expected to have clawed back only £2.3billion.

    ‘We will not be able to recover it all,’ said Jim Harra. ‘You will reach a point of diminishing returns in terms of good use of resources.’

    HMRC’s Taxpayer Protection Taskforce, which has nearly 1,300 staff, was set up this year with £100million from the Government. It has already recovered £800million of the funds that were paid out in error or through fraudulent claims.

    The taskforce has already recovered £800million of the funds that were paid out in error or through fraudulent claims during the coronavirus pandemic

    The taskforce has already recovered £800million of the funds that were paid out in error or through fraudulent claims during the coronavirus pandemic

    Another £1.5billion is expected to be recouped by the end of March 2023. But that will still leave £3.5billion outstanding.

    Mr Harra said that at some point tax authorities would need to ‘move on’, adding: ‘These are time-limited schemes. We do need to put them to bed at some stage.’

    March 2023 is the deadline for the current phase of the task force.

    Mr Harra told the Financial Times: ‘Whether there’s anything that goes on beyond that will depend, I think, on what we find and the rate of return that we’re getting.’

    HMRC paid out more than £81billion through the Coronavirus Job Retention Scheme, the Self-Employment Income Support Scheme and Eat Out to Help Out during the pandemic.

    But the speed at which the schemes were set up and the high levels of demand meant tax authorities had to employ what Mr Harra said were ‘trade-offs’ to ensure support reached as many people as possible. This left the schemes more susceptible to fraud and error.

    Jim Harra (pictured) chief executive of HM Revenue and Customs said that in 18 months¿ time a task force set up to recoup the money is expected to have clawed back only £2.3billion

    Jim Harra (pictured) chief executive of HM Revenue and Customs said that in 18 months’ time a task force set up to recoup the money is expected to have clawed back only £2.3billion

    The taxman is also facing problems in handling the huge jump in debts as businesses and individuals struggled to pay their taxes during the pandemic.

    The National Audit Office (NAO), the public spending watchdog, raised concerns last week about the ability of HMRC to recover the £42billion in tax debt owed to it at the end of September, although this was lower than the record high of £67billion recorded in August last year.

    The NAO also noted that HMRC was ‘unlikely to have sufficient capacity’ to manage the higher levels of debt following years of job cuts.

    Mr Harra conceded that the tax authority could ‘always do more’ with additional staff, but said he was still hoping to cut the debt to £33billion by the end of the 2021/22 financial year on April 5.