HMRC – Fight against fraud

It has been identified, through an HMRC trial that was looking into ways to reduce tax fraud and error, that £20m of potential losses after 5,500 cases from a sample of £16,000 showed irregularities.

As part of the taxman’s strategy to tackle the problem of tax credit fraud and error, he plans to use “sophiticated data analytics”.  Despite the tax credit fraud and error being at it’s lowest level, the cost to the taxpayer in 2011/12 is £2.09bn in incorrect payments.

Ministers have now asked HMRC to explore the types of service the commercial sector can offer on a larger scale and to engage with potential suppliers, to gain an informed understanding of indicative costs, benefits and timelines ahead of an invitation to tender.

The overall aim is to add capacity to HMRC’s existing workforce in order to significantly increase the number of successful tax credits compliance interventions and to drive down error.

HMRC ran a small-scale trial from May to July 2013 with Transactis and sub-contractor Bosch. Both were recruited to carry out the small-scale trial in line with standard Cabinet Office rules. A summary of the trial is due to published in the near future, although no date has been selected as yet.

HMRC are also toughens up by making  its scheme registration process more stringent in an attempt to prevent pension liberation fraud.

From 21 October, HMRC will move away from a “process now, check later” approach.  Scheme registration will no longer be confirmed on successful submission of the online form, instead the taxman will carry out “detailed risk assessment activity” before deciding to register a scheme.

HMRC are also going to make it more difficult to transfer funds between registered schemes. When trustees request information from HMRC about the legitimacy of a receiving scheme, it will no longer seek consent from that receiving scheme.  It said in its guidance: “However HMRC will only provide confirmation where the receiving scheme is registered and the information held by HMRC does not indicate a significant risk that the scheme was set up, or is being used, to facilitate pension liberation.

Otherwise, a response will be issued setting out the conditions in which HMRC will confirm registration status and explain that one or both of the conditions are not satisfied.”

The change comes after trustees and administrators complained they feared allowing members to transfer to suspicious schemes, but also afraid they could breach their duties by blocking transfers, despite reassurance and guidance on transfers from The Pensions Regulator.