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Criminals make 20,000 false tax credit claims
Scale of fraud begins to unfold as government reveals new figures...

By Andy McCue

Published: Monday 16 January 2006

More than half of the 40,000 suspicious tax credit applications detected by HM Revenue and Customs (HMRC) during a six-month period last year are believed to have been made by organised criminal gangs, new government figures have revealed.

The huge rise in fraud attempts forced HMRC to close the online tax credits portal at the beginning of December last year after it discovered personal details of 13,000 civil servants working at the Department for Work and Pensions (DWP) had been stolen and used by criminals to make false claims.

The tax credits portal remains closed and HMRC admits it still does not know the full extent of the fraud. But the department has now revealed it intervened in 38,924 suspicious claims between April and November last year before they got to payment stage.

In answer to questions from MPs last week, Dawn Primarolo, paymaster-general, said more than half of these claims were the result of organised attacks, and HMRC intervened in another 22,380 cases where tax credit was already in payment and fraud was suspected during the same period.

Primarolo said: "HMRC are aware of persistent attempts by organised criminals to obtain tax credits by using stolen or fictitious identities and it monitors payments to detect organised fraud so that any payments can be stopped and followed up with those responsible."

Under the new criminal offence of tax credit fraud, HMRC prosecuted 153 people in the financial year 2004/05 and has prosecuted 159 already in the first six months of the current financial year. Another 97 cases are currently awaiting verdict.

The tax credit website handles around half a million transactions per year and the fraudsters were able to change claim details and redirect the money into their own bank accounts by getting hold of a genuine claimant's name, date of birth and national insurance number.

Chancellor of the Exchequer Gordon Brown said in his pre-Budget report at the end of 2005 that new anti-fraud measures would include HMRC doubling the checks it carries out on new claims for tax credits before payments are made.

A HMRC statement said: "HMRC has robust strategies in place for tackling fraud. Anywhere that the government, like any other large financial organisation, pays out money there will be some people intent on defrauding the system and we designed tax credits with that in mind."