Software glitches at heart of £2.8bn tax credit fiasco

Tax officials chasing overpayments led to discovery of errors

HMRC software contributed to £2.8bn costs

Faults embedded in tax credit software combined with "rogue" files that could not be erased from the system are among causes blamed for losses totalling a potential £2.8bn by HM Revenue & Customs (HMRC).

The losses have emerged after victims pursued for "overpayments" by bungling officials used data protection legislation to obtain copies of their own files to prove it was official error and not fraud or delay on their part that caused huge overpayments.

Sarah McCall, a spokeswoman for information and support group Tax Credit Casualties, said a common problem that emerged was that when operators at tax credit call centres changed screens earlier information was deleted. In some cases this led to spouses' incomes being automatically zeroed in spite of information supplied by applicants.

She said another error, claimed to have since been corrected, arose when operators who were unable to delete or correct data on earlier files created new ones, leaving the earlier "rogue files" to cause on-going problems.

The file involving one claimant who was being pursued for over £6,000 in overpayments showed what were described as "software glitches" causing a series of errors, including the wrong income details and the removal of his six-year-old daughter from some assessments.

Other files obtained also indicate "computer error" persisting since the original faults when the system was set up in 2002. The National Audit Office qualified the latest HMRC accounts because of money lost through overpayments and fraud.

An HMRC spokeswoman told Computing: "Due to taxpayer confidentiality, HMRC cannot discuss any individual cases. There are no so-called 'glitches' in the system – the tax credits system is working well,
and the accuracy rate for our processing stands at 97 per cent."

The spokeswoman confirmed £1bn has been written off and provision has been made to write off a further £1.8bn.

EDS, the original government contractor, agreed to pay just £71.25m in compensation for initial computer problems.