Thousands of UK families were caught in the crossfire of a government effort to tackle benefit fraud, when a system intended to flag ineligible claimants malfunctioned. Parents, many of whom were still living in the UK, unexpectedly had their child benefit stopped without prior notice.
The incident stemmed from changes to HMRC’s fraud detection system, which sought to identify parents who had left the country for extended periods. While the initiative aimed to reduce benefit misuse, its flawed implementation affected legitimate recipients, prompting questions about oversight and operational readiness.
PAYE Check Removed in Rollout of Fraud Crackdown
The issue originated in August 2025, when HMRC expanded a new fraud detection system designed to identify claimants who had left the UK for more than eight weeks, and were therefore no longer eligible for child benefit. The system had functioned as intended during its pilot phase. But when rolled out nationally, a critical safeguard was dropped: the Pay As You Earn (PAYE) check.
Without the PAYE check, the system mistakenly flagged thousands of parents as having left the country. This led to automatic suspension of benefit payments for over 23,700 individuals. According to information presented to the Treasury Select Committee, 17,048 of these cases have now been resolved in favour of the claimants.
HMRC’s Exchequer Secretary, Dan Tomlinson, confirmed in a written response to Conservative MP Andrew Snowden that “the removal of the PAYE check had resulted in some customers being incorrectly included in the compliance campaign.” He added that HMRC “took swift action to reinstate the PAYE check and apply it retrospectively,” halting the automatic suspension of payments during future investigations.
Approximately 5,600 cases remain under review, mostly involving claimants who have yet to respond to letters, phone calls or other outreach attempts, according to HMRC’s Permanent Secretary John-Paul Marks. A further 1,109 individuals were confirmed to be non-compliant.
Northern Ireland Families Hit Hardest by Travel Data Glitch
One significant issue uncovered during the inquiry was a technical flaw that disproportionately impacted families in Northern Ireland. According to HMRC officials, residents often travel out of the UK through ports monitored by the UK Home Office but return via Dublin Airport, located in the Republic of Ireland. Since re-entry through Dublin is not always recorded in UK systems, the data misleadingly indicated that these individuals had not returned to the UK.
As a result, Northern Ireland claimants were incorrectly deemed ineligible. HMRC has now exempted this group from certain international travel checks after acknowledging the oversight. According to HMRC’s Customer Strategy Director Jonathan Athow, the original trial only involved around 140 Northern Ireland cases, too few to reveal the scale of the potential problem.
The case has drawn criticism from MPs, including Treasury Committee Chair Dame Meg Hillier, who questioned why this risk had not been identified earlier. Mr Marks admitted that the incident exposed “weaknesses in how HMRC transitioned from pilot schemes to full implementation.”
HMRC has since revised its compliance process. Claimants are now granted at least one month to provide evidence of their eligibility, followed by another month to respond to queries before any suspension occurs.
