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Jim Harra
Gov.uk_Jim-Harra

HMRC boss brands Covid fraud losses ‘inevitable’

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Although predicted to reclaim just £1 in every £4 of £5.8bn in coronavirus support cash handed out erroneously, HMRC said it fully expected fraudsters to bilk the system and could do nothing to stop it.

3rd Feb 2022
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HMRC’s chief executive told the Treasury select committee this week that it was “inevitable” billions of pounds of Covid-19 support would be lost to fraud and error, and there was nothing the agency would have done differently during the pandemic.

Jim Harra told MPs the tax inspectorate hadn’t given up chasing down the £5.8bn it had identified as incorrectly allocated, but the number of small claims that added up to huge sums made reclaiming the money almost impossible.

“We expect to recover about £1bn,” Harra told lawmakers on the Treasury Select Committee scrutiny panel on Wednesday. “It’s not realistic of me to expect us to reclaim all of it.” 

When pressed that the number was high, some £3 of every £4 gone to either criminals or paid out erroneously, Harra said HMRC’s systems relied on self assessment, with little third-party checks carried out.

“We were up against a potential chilling effect on employment if we had not acted fast,” he said. “Difficult decisions were made about the controls introduced. People we would want to help would otherwise have been excluded.”

The Treasury recently revised down the amount it expects to recover by 2023; just 25% of a total £5.8bn paid out due to fraud and error in relation to the coronavirus support schemes.

Asked if there was anything his office could have done differently, Harra said “no”. 

“Error and fraud are not acceptable, but were inevitable,” he said. “If we had the luxury of more time, we could have collected more third-party data to verify what we were told, but it wasn't realistic to do much more.”

Committee chairman Mel Stride said it was “troubling” that HMRC appeared to accept the loss of billions of pounds of public money without any admission it could have done better.

Customer service “back to normal”

The agency is increasing its compliance numbers, although it takes on average 18 months to fully train up an inspector, and it said the full benefit would not become apparent for at least two years. 

It also said it will continue to nudge people away from phone-calls and letters when trying to contact the agency, instead directing them towards the HMRC website and chat bots.

Despite constant criticism of the agency’s customer service from the industry throughout the pandemic, as highlighted frequently by the AccountingWEB community, HMRC bosses said normal service has resumed.

“We are on track to deliver pre-pandemic levels of service,” said Angela MacDonald, deputy chief executive and second permanent secretary, HMRC. “Our aim is to get an on-target position, with about two million items. It sounds enormous, but we get about 1.8m pieces of post every month.”

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Replies (31)

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By Justin Bryant
03rd Feb 2022 11:43

"Asked if there was anything his office could have done differently, Harra said “no”.

“Error and fraud are not acceptable, but were inevitable,” he said. “If we had the luxury of more time, we could have collected more third-party data to verify what we were told, but it wasn't realistic to do much more.”"

He has form for keeping a straight face when justifying similar farces like the loan charge (notwithstanding that he described that in internal emails as a debacle and where they had plenty of time). That said, I did not think BBLs were HMRC's responsibility. Rather it was BEIS and they could have picked up the phone to me and saved these £bns by simply Googling the company name (to check its history and connections) or employing staff to make simple phone checks and/or visit addresses etc. Also, don't HMRC boast access to a super computer ("Connect") for these kind of checks? If so, how come it couldn't be successfully used then and now?

Thanks (1)
Replying to Justin Bryant:
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By sammerchant
04th Feb 2022 16:56

The banks were obviously getting some sort of remuneration for handling the loans. Perhaps they should have been asked to do the preliminaries that you have set out above. Any company that started trading less than 6 months earlier should have been put in a different category for further vetting.

But why should Harra care? It's not his money!

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LL
By RickyRoark
03rd Feb 2022 12:02

#HarraOut

Thanks (2)
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By GHarr497688
03rd Feb 2022 14:26

Having been a part of HMRC's process at the time I would disagree with Harra. Had HMRC listened to Accountants things would have been controlled in a much better way. Accountants in many ways are the eye's of HMRC and could have been far more involved rather than excluded from the process. Most Accountants understand their clients and so they would have known what targeted support was needed rather than "this fee for all".
HMRC are able to offer VAT refunds to most Vat registered business entities as they are for PAYE/CT/Income tax. The information for targeted support was available without the need to open up these ridiculous portals for claims that HMRC are now saying they can't check. If they have no resources to check then why ask in the first place. Looking at Aweb the data between different business entities and the different schemes seems a system was introduced that can't be checked. The other point is that surely looking at whats happened in Asia with pandemics should HMRC and Government not be more prepared with systems in place rather than the attitude that this will never happen in the UK. With regard to service levels , in my case they can't even answer simple question but would rather invest heaps of taxpayers cash into MTD which is proving to be one of the worst thought out changes to the tax system in our history . With 2 million SA filings not made and 4 million going in close to the deadline how on earth are Taxpayers going to make filings 6 times in a year on top of keeping records up to date. I despair I really do.

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By AndyC555
03rd Feb 2022 14:32

"Harra said HMRC’s systems relied on self assessment"

Unless you were a company director who used dividends as part of your company remuneration strategy when HMRC said they couldn't tell where dividends declared in a tax return came from so couldn't entertain a furlough equivalent.

Thanks (3)
Danny Kent
By Viciuno
03rd Feb 2022 15:20

"It also said it will continue to nudge people away from phone-calls and letters when trying to contact the agency, instead directing them towards the HMRC website and chat bots."

This is pure lunacy. Guy is clearly incompetent. If the humans we speak to can't get things right, or corrected, what are the chances of a chat bot being able to do anything. Especially considering it's usually these same computers that make the mess in the first place!

Fine for Joe Blogs who decides to have a go at their self assessment and asks ridiculous questions like the one the other day about including pension income in a VAT return. For agents who deal with this day in and day out and who phone not to ask for advice but to get HMRC to sort out their s**t it has to be said that a website and chatbot are just not good enough.

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By North East Accountant
03rd Feb 2022 15:32

So there's £3/4/5 billion (whatever it is) down the drain and he wouldn't do anything differently.........you've got to be kidding.

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By ireallyshouldknowthisbut
03rd Feb 2022 16:07

I htink Jim needs to ask WHY there are so many calls to HMRC

Not berate people calling.

How many calls does my office make due to the nonsensical Class 2 NI problem? The tax return should push the NI record and it would resolve the issue overnight.

How many calls does my office make dealing with HMRC's errors or delays?

How many calls does my office make to chase up earlier calls?

How many calls does my office make due to the incomprehensible rules?

If you cut out the above 4 we would rarely contact HMRC.

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By More unearned luck
03rd Feb 2022 17:46

"Customer service “back to normal”"

That bad then.

Thanks (9)
Tornado
By Tornado
03rd Feb 2022 18:10

This man lives in his own little fantasy world.

He makes extraordinary statements that have no basis in reality and thinks everything is fine or perhaps only a little not-fine.

Thanks (4)
Red Leader
By Red Leader
03rd Feb 2022 18:13

He sounds ideally cut out to work at No 10 at the moment.

Thanks (5)
Replying to Red Leader:
By Husbandofstinky
04th Feb 2022 13:22

Exactly my thoughts. Deluded and far from reality.

Jim - there's life on this planet but not as we know it.

Thanks (2)
Kieran Phelan
By KPEM online
04th Feb 2022 05:22

Every client of ours who are VAT registered in construction had an enquiry on their first return after 1 March which applied the new domestic reverse charge rules.

Surely improving their system internally to identify valid businesses entitled to refunds rather than mass enquiries would help their overall resources too.

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Kieran Phelan
By KPEM online
04th Feb 2022 05:21

Every client of ours who are VAT registered in construction had an enquiry on their first return after 1 March which applied the new domestic reverse charge rules.

Surely improving their system internally to identify valid businesses entitled to refunds rather than mass enquiries would help their overall resources too.

Thanks (2)
Stepurhan
By stepurhan
04th Feb 2022 08:47

"If we had the luxury of more time, we could have collected more third-party data to verify what we were told"

I had a case where a client claimed SEISS when their sole trade had been reported as ceased on a tax return. I'm sure there are many other cases where the information HMRC already had could have spotted issues. There is a big difference between "we didn't have time to set up detailed third party checks" and "we didn't bother to do simple tests on information we already had".

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Replying to stepurhan:
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By Roland195
04th Feb 2022 11:25

I have had this too - a cessation date clearly populated on the 5th April 2019 return along with other indicators of cessation of self employment filed early Summer 2019 then 2020 Return showing no SE filed early Summer 2020 but 4 SEISS grants paid out with no issue whatsoever up until the filing of the 5th April 2021 return (which to their credit they did revise immediately to include the amounts that had clearly slipped my clients mind).

What are they suggesting would have made a difference here?

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By RFL H
04th Feb 2022 10:39

Appalling complacency at the top of HMRC.
Yes you could have done more - all you needed to do was involve us agents in the process. You seem to have forgotten we are gatekeepers and all legitimate businesses use one of us. Pathetic.
Things are only going to get worse for agents as they continue with the madness of MTD and expect a bot to answer an agent call.
They should be ashamed but instead claim they are not properly funded. Pathetic. Just drop MTD and staff the agent line.

Thanks (4)
Replying to RFL H:
Tornado
By Tornado
04th Feb 2022 10:58

"Things are only going to get worse for agents as they continue with the madness of MTD and expect a bot to answer an agent call."

This is true, but as I have said on a number of occasions, it is entirely the responsibility of HMRC to provide systems and services that work properly. It is not our responsibility to make MTD work, our go out of our way to help HMRC, particularly when they show such contempt for us.

Our responsibility is to our clients and we will continue to do this as best we can with the limited (functional) resources provided to us by HMRC.

Thanks (6)
Replying to Tornado:
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By Southwestbeancounter
04th Feb 2022 18:04

....but as I have said on a number of occasions, it is entirely the responsibility of HMRC to provide systems and services that work properly. It is not our responsibility to make MTD work, our go out of our way to help HMRC, particularly when they show such contempt for us.

Our responsibility is to our clients and we will continue to do this as best we can with the limited (functional) resources provided to us by HMRC.

[/quote]

Well said Tornado!!!

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By jayesh21
04th Feb 2022 10:39

Wait until Bounce Back Loan, etc. come to light where people have vanished after taking hundreds of thousands which are government backed.

This country is going down from 1st world to god knows where!

Anyway, anyone up for a game of golf? Lol

Thanks (4)
Replying to jayesh21:
By plummy1
04th Feb 2022 14:51

Always up for a game of golf but could I borrow your clubs? I promise I'll give them back honest.

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Replying to jayesh21:
By plummy1
04th Feb 2022 14:51

Always up for a game of golf but could I borrow your clubs? I promise I'll give them back honest.

Thanks (0)
By Nebs
04th Feb 2022 10:52

Let the private sector collect the covid fraud losses. For a 50% fee I doubt there would be a shortage of people willing to give it a try.

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By meadowsaw227
04th Feb 2022 11:27

As I have said before I "policed" my clients uptake and PAYBACK of BBL!s and every one has been either been paid back in full or lump sums paid off them.
Similarly if I had a client who misrepresented their income to fraudently get a bbl I would have dealt with that as well.
IMHO it doesn't help that we as a profession keep berating the government for there assistance in keeping businesses afloat but do little or nothing to help.
A full list of all businesses and people with unpaid BBL`s should be published so we accountants can deal with the miscreants properly and not take them on as clients.

Thanks (2)
By plummy1
04th Feb 2022 11:38

Probably the most worrying thing in this whole article is the heading Customer Service has Returned to Normal. This must be some new and interesting definition of normal we've never heard of before.

Thanks (6)
Replying to plummy1:
By Nick Graves
04th Feb 2022 11:51

plummy1 wrote:

Probably the most worrying thing in this whole article is the heading Customer Service has Returned to Normal. This must be some new and interesting definition of normal we've never heard of before.

It's the New Normal, comrade Plummy.

We've always been at war with Bureautania...

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Replying to Nick Graves:
By plummy1
04th Feb 2022 12:41

Thank you Citizen Graves. Long live Brititania and down with Bureautania.

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Replying to plummy1:
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By Hugo Fair
04th Feb 2022 15:06

It should have been Jimboy's 'Gerald Ratner' moment ... but we've all learned to accept nothing but cr8p from him, so plus ca change!

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By Tosie
04th Feb 2022 13:03

Maybe just maybe a junior in HMRC could read the money laundering reports submitted by accountants as I am fairly confident that many of us will have highlighted blatant fraud.

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By indomitable
04th Feb 2022 18:30

Part of the problem is the government "panicked" and bought these schemes in without even thinking or implementing any sensible basic checks. Most of us knew from the start the "bounce back loan scheme" would end up in a huge loss to the treasury which is in fact our money.

Typical civil servant trying to justify poor decision making and implementation

£17BN in fraud & write offs of loans
£14BN in aborted PPE contracts
£28BN on Track and trace that didn't work

(I think these figures are fairly accurate but could be alot more once everything is tallied up)

The amounts are staggering where is the accountability for OUR money

Thanks (3)
Profile
By indomitable
04th Feb 2022 18:30

Part of the problem is the government "panicked" and bought these schemes in without even thinking or implementing any sensible basic checks. Most of us knew from the start the "bounce back loan scheme" would end up in a huge loss to the treasury which is in fact our money.

Typical civil servant trying to justify poor decision making and implementation

£17BN in fraud & write offs of loans
£14BN in aborted PPE contracts
£28BN on Track and trace that didn't work

(I think these figures are fairly accurate but could be alot more once everything is tallied up)

The amounts are staggering where is the accountability for OUR money

Thanks (0)