Tax credits prop up migrants' homes

Eastern Europeans are fleecing UK tax credits by bogusly claiming child allowance so they can buy homes in their homeland, Whitehall was told this week.

As many as 500 low-paid workers from Slovakia, Latvia and Lithuania have come to Britain falsely claiming they live with their children, to qualify for handouts up to £5,000 each.

Once the account is set up, the funds are typically used to buy small properties in Eastern Europe – regardless of whether the claimant has children, or has since left the UK.

Such abuse of tax credits is on an "industrial scale," according to Richard Bacon MP, who was handed a dossier exposing the scam by insiders at HM Revenue & Customs.

Inside, are details of what he claims could be "one of the greatest financial scandals ever seen in the UK."

The dossier is now in the hands of Sir John Bourn, head of the National Audit Office, the government's spending watchdog, for a full investigation.

A spokeswoman for Revenue & Customs yesterday told Contractor UK it has seen no "evidence" of the alleged fraud, which Mr Bacon claims is currently costing the taxpayer £4billion.

"We have asked the NAO to share with us any issues raised in the dossier, which are not already the subject of our ongoing dialogue on tax credit issues," the spokeswoman said.

"HMRC takes fraud very seriously and has a range of checks in place throughout the life of each claim. If fraud is suspected, payment is stopped. In the most serious cases prosecution for the criminal offence of tax credit fraud will be considered."

Under the tax credits system – Gordon Brown's flagship idea to help poor families, eastern Europeans can claim benefits providing they register with the Home Office Workers Registration Scheme.

Nationals from the new member states who work for a minimum of one month in the UK are then entitled to claim tax credits on the same basis as any other UK or EEA national, such as French or German nationals.

Reflecting on the tax credits system, the MP for Norfolk South said it is to blame for "creating new avenues for organised crime and fraud on an industrial scale," if the dossier figures are accurate.

"If some of the numbers being talked about here are anywhere near true, then this is larger than any bank theft in history and amounts to one of the largest financial scandals seen in the UK," Mr Bacon said, speaking to The Daily Telegraph.

The dossier claims that the system's abuse by immigrants is costing £4billion – more than twice the amount HMRC paid out in tax credit overpayments through administrative and IT error.

Officials are already investigating 40 separate cases of tax-credit fraud, including the incidence of criminal gangs hijacking civil servants' identities.

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