TAX CREDITS_[pound]1bn lost to mistakes and crime as payment

The tax credit system lost over [pound]1bn in 2004-05 because of fraud and error - an "unacceptably high" level - according to estimates from the National Audit Office for the last year for which figures are available.

Although Revenue and Customs closed its tax credit website in December 2005 - as a result of attacks by organ-ised criminals - it still lost [pound]40m to organised fraud in the course of the year.

The scheme was introduced to help people in low-income families get back into work. But since launch in 2003, tax credits have been plagued by complexity, errors and fraud.

Overpayments arising from adjustments to awards, and other small changes to entitlement, have led to a debt of [pound]6bn.

The NAO said [pound]3.9bn had yet to be repaid, while Revenue and Customs admitted that up to [pound]1.6bn may have to be written off completely.

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