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Seven in 10 parents who had child benefit suspended in an HMRC fraud crackdown last year were in fact legitimate beneficiaries who had not emigrated, the tax authority has revealed.
The chief executive of HMRC, John-Paul Marks, told the Treasury select committee that 71% of those targeted, higher than the 63% previously admitted, were in error.
Marks said that “just under 5%” of the 23,700 parents who lost their child benefit were in fact fraudulent claimants.
Meg Hillier, the chair of the committee, accused HMRC of causing unnecessary “pain” to innocent parents and making an “egregious error” in assuming parents who had used Dublin airport to return to Northern Ireland had emigrated.
The admission shows a major system failure by HMRC, which had told the government before rolling out the scheme in July that it could save up to £350m in benefit fraud over five years.
It had piloted a scheme the previous year but used PAYE records and Home Office travel data to try to work out what parents had emigrated and were still claiming child benefit.
But when the scheme was rolled out, the PAYE checks were removed, leaving incomplete Home Office travel records as the basis of the calculation of fraud.
Parents said they were left frightened and stressed after they received letters telling them their benefit was being suspended with demands they answer 73 questions involving detailed medical records, school reports and bank statements to prove they were not fraudsters.
The 71% error percentage is much higher than previously admitted when HRMC told the Conservative MP Andrew Snowden in a written answer before Christmas that 63% of the parents had been wrongly targeted because of flawed travel data.
Hillier asked the HMRC chief why nobody had considered the pain caused to parents, after he admitted that just 5% of accounts suspended had so far proved to be fraudulent or erroneous claims from people who had emigrated.
She said HMRC should not have assumed parents in Northern Ireland were emigrating if they left for holidays or business from Belfast airport but returned via Dublin airport, an hour from the border.
After an investigation by the Guardian and the Detail investigative website, it emerged that the Home Office data also included “no show” records of passengers who had not used booked flights but for various reasons including sickness or change of business plans.
One parent told of how her child support was stopped after they could not make the flight after one of her children had an epileptic seizure at the departure gate.
Another said she had been caught out after going to France to collect the remains of her husband who had died while abroad but the Home Office had no record of her return journey.
Hillier said she was puzzled as to why HMRC decided to strip people of child benefits and then do PAYE crosschecks later.
Marks said the PAYE checks had been reinstated. “We’ve apologised for making that error,” he said.
Hillier said “one of the things that appalled” her about the fiasco was what happened to parents in Northern Ireland who had used Dublin airport for their travel and HMRC should have known about “issues about the border between Northern Ireland and the Republic.
“This seems to me an egregious error from a UK government department,” she told Marks.
Marks told the committee that 17,048 of the 23,794 parents were stripped of benefit in error.
Of the 23,700 accounts that were suspended “about 1,109”, which is “just under 5%”, were “determined non-compliance” but of the 5,600 inquiries still open it expected the figure to increase.
He said he expected that between 30% and 50% of those who would be targeted in future would be wrongfully claiming benefit from abroad.
Asked by Hillier why HMRC had decided not to use PAYE checks, which had been used in the pilot scheme in 2024, he said it had thought it could “streamline” the anti-fraud operation by introducing the PAYE check “at the point of where there was a considerative decision rather than upfront”.
