The confession to having ‘taken a conscious decision not to check whether there was money outstanding from previous years’ was accepted by the Commons watchdog Public Accounts Committee.
The Revenue said what they wanted was to get sub-contractors’ tax affairs in order and they only applied penalties where there was evidence of fraud and prosecuted where there was deliberate large-scale fraud.
But MPs on the committees said that now the new scheme – which netted £280 million in extra tax and national insurance contributions – had matured they should take steps to increase compliance activity in an attempt to rake in more.
Taxmen took the action after introducing new arrangements in August 1999 for a million construction industry workers to reduce the risk of non compliance and undeclared cash payments to ‘ghosts’ and ‘moonlighters’.
The PAC, elsewhere in a report on the Inland Revenue’s Appropriation Accounts, said ‘it remains to be seen’ if Comptroller and Auditor General Sir John Bourn will be able to rely on the Revenue’s own compliance activity to be assured there is no significant fraud in the new tax credit scheme.
Bourn has been denied the right of access to employers’ records to assure himself of the accuracy and reliability of tax credit payments to employees – a process which MPs pointed out involved significant error and fraud when handled by the Benefit Agency.
Committee Chairman Edward Leigh also rapped the ‘cavalier’ decision of the Revenue to close a million taxpayers’ records from 1997-8 affected by the NIRS2 computer difficulties, keeping around 134,000 in ignorance of their entitlement to refunds averaging £148 a head.
The Revenue have since sent letters inviting only those who can prove overpayments to make claims.
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