HM Revenue and Customs (HMRC) has admitted nearly three-quarters of parents investigated under its child benefit fraud scheme were wrongly accused of claiming payments while living overseas.
The disclosure was made by HMRC chief executive John-Paul Marks during an appearance before the Treasury select committee.
Mr Marks told MPs that 17,048 of the 23,794 parents who had their child benefit payments suspended were legitimate claimants who had not left the UK, which equates to almost 72 per cent of all cases reviewed under the scheme.
The admission marks a significant increase on the 63 per cent error rate HMRC acknowledged before Christmas.
The investigation was designed to identify parents who had emigrated while continuing to claim child benefit.
Treasury select committee chair Meg Hillier criticised the scale of the errors uncovered.
She told Mr Marks: “This seems to me an egregious error from a UK government department,” and said HMRC caused unnecessary “pain” to families who had done nothing wrong.
Mr Marks confirmed only around five per cent of those targeted had so far been found to be genuine fraud cases.
He told the committee that approximately 1,109 cases had been confirmed as non-compliant.
HMRC has admitted that nearly three-quarters of parents investigated under its child benefit fraud scheme were wrongly accused
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GETTY
The scheme was first piloted in 2024 using a combination of Home Office travel records and PAYE employment data.
Under the pilot, HMRC cross-referenced border movement information with tax records to identify parents who had left the country.
Mr Marks said the approach initially proved effective during the limited trial, however, the methodology changed when the scheme was rolled out nationally last July.
HMRC officials removed the PAYE verification process in an effort to streamline operations.
As a result, incomplete Home Office travel data became the sole basis for determining whether claimants had emigrated.
The committee heard that the change significantly increased the risk of errors.
The flaws were particularly acute for families living in Northern Ireland.
HMRC officials removed the PAYE verification process in an effort to streamline operations
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GETTYHMRC records treated departures from Belfast airport followed by returns via Dublin as evidence that claimants had left the UK permanently.
Ms Hillier questioned how such cross-border travel patterns could have been overlooked.
She said it was difficult to understand how a UK Government department failed to account for routine journeys between Northern Ireland and the Republic of Ireland.
Further problems were uncovered through investigations by the Guardian and the Detail website.
These investigations revealed that Home Office travel data included so-called “no show” records.
Such records were created when passengers were logged as booked on flights they never boarded.
Parents were still flagged as having left the country despite remaining in the UK.
The committee heard examples of families affected by the errors.
One mother lost her child benefit after missing a flight when her child suffered an epileptic seizure at the departure gate.
Another woman was investigated after travelling to France to collect her late husband’s remains, but because her return journey was not captured in official data, HMRC wrongly assumed she had emigrated.
Parents caught up in the scheme received letters demanding answers to 73 questions and were instructed to provide medical records, school reports and bank statements to prove they were living in the UK.
Several told MPs they felt frightened and under severe stress as the process unfolded.
Mr Marks apologised for the failures identified by the committee and confirmed that PAYE verification checks have now been reinstated.
He said the additional safeguards should prevent similar errors in future.
The TSC said it will continue to monitor HMRC’s handling of the scheme
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GETTYHe told MPs that around 5,600 cases remain under investigation and that the number of confirmed fraud cases is likely to rise as those inquiries conclude.
Looking ahead, he said future versions of the scheme should be more accurate, estimating that between 30 and 50 per cent of those targeted in future exercises will be genuine overseas claimants.
The child benefit fraud initiative was originally presented to ministers as a cost‑saving measure, with officials claiming it could save up to £350million over five years.
The TSC said it will continue to monitor HMRC’s handling of the scheme, while Ms Hillier warned that restoring trust will require clear evidence that proper safeguards are now in place.