A new investigation discovered HMRC didn’t consider the impact it would have on people receiving the benefit
HMRC’s plan to cut down on people fraudulently claiming child benefit last year saw thousands of families stripped of their benefits despite playing by the rules. A new investigation looking into the error has ruled that HMRC must “apply lessons” learnt from this scheme to reduce fraud and error in the system.
Last August, HMRC rolled out a new initiative that would team up with the Home Office to track people claiming Child Benefit when they left the country. Claimants who were away from the UK for more than 12 weeks were meant to be flagged for a possible fraud and error investigation.
While a pilot in 2024 prevented an estimated £15million in incorrect payments from being sent out, the official rollout that started in 2025 removed one step in the process. HMRC would no longer check the PAYE system to see if the claimants were still earning or paying tax in the UK before stopping the payments.
The investigation found this vital step was removed because HMRC was using workers that were not qualified to check tax records and didn’t have the experienced staff necessary to do these checks. The National Audit Office (NAO), which investigated the situation, has now declared this as the point where thousands of genuine and eligible claimants fell between the cracks.
As a result, more than 8,000 genuine claimants had their benefits suspended without warning. A number of families had simply gone on holiday and had actually returned to the UK, but the Home Office didn’t have a record of their return to the UK.
According to the Guardian, some had not even left the UK to begin with, as one person was meant to attend a wedding in Norway that was cancelled before they had got on their flight. Others reportedly had genuine reasons to stay abroad longer than planned, like one family whose child suffered a seizure at the departure gate.
HMRC apologised twice last year for the mistakes in the initiative, after claimants reported financial and emotional impact of the error including a sudden loss of income and stress in trying to prove their eligibility to get their payments restarted.
The NAO investigation claimed the scheme was “an innovative attempt” but warned that HMRC had “insufficient governance and risk management, and did not consider the impact on claimants”.
As of April 2026, HMRC had paid a total of £3,200 in compensation to 51 claimants. It relaunched the process in March with some changes, including putting the PAYE check back in place, giving claimants a month to prove their eligibility before payments are suspended and allowing them to submit evidence online.
Gareth Davies, head of the NAO, said: “It’s right that HMRC seeks new ways to tackle fraud and error. HMRC’s initial work on using travel data to investigate potential Child Benefit overpayments suggested it could secure significant savings for the taxpayer. However, missteps in implementing the first rollout meant HMRC did not strike the right balance between detecting fraud and error and managing the impacts on Child Benefit claimants.
“While HMRC should not be discouraged from pursuing innovative ways to reduce fraud and error, it must learn and apply the lessons for future initiatives.” An HMRC spokesperson said: “We welcome this report, which recognises how data can help tackle Child Benefit error and fraud.
“We’ve acknowledged that some mistakes were made initially, but we took swift action to put things right and strengthened our approach with extra safeguards. Our work so far has prevented thousands of customers claiming incorrectly, protecting tens of millions of pounds of taxpayers’ money.”
