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Fraudsters' £55m booty as Revenue dithers on tax site

The delay is revealed in the department’s annual audit report – a document which also raises questions about the credibility of a variety of statements made by ministers and Whitehall officials about the department’s IT systems.

On 18 January 2006, Treasury minister Dawn Primarolo told the House of Commons that HMRC officials had taken “swift” action to tackle organised fraudsters who were making multiple false claims for tax credits through the department’s e-portal website. She put the losses as a result of organised fraud at £2.7m.

But a report of the National Audit Office last week found that it took a year from when HMRC first became aware of attempted fraud through its e-portal, to when it closed down the site in December 2005.

By the time the site was closed 62,000 fraudulent claims had been made through the website using stolen identities, of which 33,000 were successful, resulting in payments of about £55m, not £2.7m.

The annual audit also vindicates the comments made by HMRC chief information officer Steve Lamey in May last year. Lamey had criticised inconsistent working practices at some tax offices, and pointed out that some IT equipment was of interest to historians.

When his comments were reported in Computer Weekly, HMRC issued a public retraction. But the report of the audit office criticises “inconsistent working practices”, poor adherence to procedures and PAYE IT equipment which it says dates back more than 20 years.

The audit report found that the delayed implementation of Eric – a system introduced in 2005 to automatically process online PAYE returns from employers – had caused “significant backlogs of returns, some of which required manual processing.”

By the end of May 2006 – more than a year after employers had been compelled by law to file returns – HMRC still had 3.7 million items to put onto its PAYE systems – about 7% of the total.

But in June 2005 HMRC described the delayed introduction of Eric as a minor problem. It said at the time: “Eric went ‘live’ on 5 June, and is now processing returns in a ‘controlled go-live’. And the results are looking good – indicating that Eric is fulfilling all of its design functions properly.”

Read article: Taxpayers pay price of government's buggy systems


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