Public spending watchdog, the National Audit Office, found that the Revenue overpaid nearly £1bn of tax credits last year.

Sir John Bourn, head of the NAO, said the overpayments were, in large part, a result of 'claimant error and fraud'.

He described the number of errors concerning the Revenue's administration of child tax credits and working tax credits as 'unacceptably high'.

Last year the Revenue was also criticised for overpayment of tax credits.

In response, the Revenue said the NAO's qualification of its accounts was 'based on a 2000/01 sample' of tax credits.

It said error rates in applying tax credits would be 'significantly lower' in the future.