HMRC Should Check Facts First Before Unleashing The Hounds

In December 2011 I wrote the following about HMRC's contract with Experian:

"HMRC and the Department for Work and Pensions (DWP) have signed a deal with Experian (the credit reference agency) to use its data to detect fraud and error in the tax credits and benefits systems.

The Guardian reports that a recent HMRC pilot protected more than £16M of potential losses in tax credits, and projected savings over the 12 months of the contract are around £700M.

David Gauke, the exchequer secretary to the Treasury, is quoted:

"The government will not tolerate people who dishonestly divert money away from those who are genuinely entitled to it. Working with Experian will allow HMRC to escalate the fight against tax credit fraudsters, helping to ensure that they are caught and punished."

HMRC has released a number of case studies illustrating where savings have been made in the pilot. One involved a woman claiming as a single parent with four children, where a search of Experian's information on financial applications showed that she had a partner living at the same address. This led to her awards being stopped.

HMRC won't say how much Experian are earning (either from direct fees or performance fees) for this work.

The Telegraph reports that Experian will identify cheats by trawling through their household bills, credit card applications and employment records and will be paid “by results".

Let us trust that this all works out well for everyone then!

I just have two small observations:

1 The results from pilot schemes run by HMRC are not always what they appear to be.

2 Not everyone is as enamoured of Experian as HMRC are."

Moving on a few years and a loyal reader contacted me the other day noting that, despite splitting up and physically separating from her husband some years ago, HMRC is hounding her for overpaid tax credits because its records show that he still lives with her ex.

Sadly, according to my loyal reader, despite her protestations that she is separated HMRC do not believe her.

My loyal reader's problems are not, as far as I can tell, unique. Whilst it is all very well for HMRC to use Experian and other means (eg credit cards, loyalty cards, social media etc) to try to help identify those it suspects of fraud, HMRC needs to bear in mind that these sources are not always 100% accurate.

Experian, for example, is not always up to date; people who split up do not always do so on a friendly basis and do not always update their records (eg addresses) with speed or accuracy (either because of lethargy or maliciousness).

HMRC should use these tools as an indicator of potential fraud, not as 100% "proof" of actual fraud; ie it should check the facts first before delivering judgement.

I would be interested to hear from others who have been placed in a similar situation to my loyal reader.

Tax does have to be taxing.

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