HMRC scheme that stopped child benefits had 71% error rate

HM Revenue and Customs (HMRC) said it has reformed an anti-fraud system that wrongly stripped more than 20,000 parents of their child benefit, including hundreds from Northern Ireland who travelled through Dublin Airport.

The scheme, which HMRC said could save up to £350m over five years, was designed to identify people who emigrated from the UK but were still claiming child benefits.

But on Tuesday a treasury select committee heard that 17,048 of the 23,794 people caught up in the crackdown were mistakenly targeted – an error rate of 71%,

Only 1,109 of the accounts initially suspended have been confirmed as fraudulent – which is less than 5%. Around 5,600 cases remain under investigation.

In October it emerged hundreds of families in Northern Ireland had their child benefit payments stopped because they returned from traveling via Dublin.

It followed the introduction of a new government anti-fraud system designed to track those who leave the country but do not come back after eight weeks, raising a red flag at HMRC for possible emigration.

That meant families returning to Northern Ireland through Dublin Airport were mistakenly flagged as having gone abroad and were therefore fraudulently claiming benefits.

On Tuesday, chairperson of Westminster’s treasury select committee, Meg Hillier, said she was “appalled” that the scheme failed to take account of Northern Ireland’s specific circumstances.

“(HMRC) is supposed to be one of the government departments that covers the entire UK… so why didn’t anybody pick up on the Common Travel Area (CTA) issues? The issues around the border between Northern Ireland and the Republic?”

The CTA allows UK and Irish citizens to travel freely into each other’s countries.

Hillier added: “This (oversight) to me just seems an egregious error from a UK government department.”

A pilot system for the crackdown had previously relied on PAYE employment checks, which were more secure.

After being asked by Hillier why the PAYE checks had been removed, HMRC chief executive John-Paul Marks told the committee that those “upfront checks” had now been brought back.

“We’ve reinstated the PAYE check… then we’ve reinstated the payments and backdated them all so the customer is not worse off, and we’ve apologised,” said Marks.

Addressing the panel of HMRC representatives, Hillier said: “I really want some reassurance that you understand the common travel area, and make sure in the future that something this embarrassing doesn’t happen.”

In response to questions from BBC NI, a HMRC spokesperson said: “We estimate that £270 million of Child Benefit payments were incorrectly claimed in 2024/25 – with unreported residency changes a leading cause.

“The pilot remains our best assessment of how using international travel data effectively can help tackle error and fraud.

“This approach means we contact less than 2% of Child Benefit customers rather than asking all recipients to regularly confirm they remain eligible.”

When asked for the number of parents still being investigated in Northern Ireland, HMRC said they would not share real-time updates about “ongoing compliance activity”.