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As much as £238 million in grants for self-employed workers may have been paid out due to error or fraud, HMRC has said.

In documents seen by BBC Radio 4’s Money Box programme, HMRC believes it to have affected 1-2% of the 4.7 million grants handed out to self-employed workers affected by the Covid-19 pandemic.

Accidentally overpaying legitimate claimants and fraudulent claims made by criminal gangs using the name of someone else are understood to be the two main causes of incorrect payments.

Speaking to the BBC, one self-employed worker said he only became aware that his name had been used falsely to secure a grant when he tried to make his own, legitimate claim for the Self-Employment Income Support Scheme (SEISS).

Andy Charles from Exeter said: “My initial reaction was just complete shock really. The application process is quite long and includes a lot of personal details, so to come to the end and be told this payment had already been applied for was quite shocking… the mind boggles really.”

He added: “I’m still, in the background of my mind, a little bit worried about what else people can get into. So can they just get into my personal tax details, is there anything else I’m not aware of?

“So some real big questions about how the online system works and how HMRC are dealing with this type of stuff at their end.”

HMRC says its system was designed to prevent and protect against fraudulent claims, and insists that is has largely been successful in doing that.

It also urges caution on the £238m figure. A spokesperson said: “We built controls into the application process, including limiting eligibility for the scheme to those who already had a tax footprint with HMRC, to stop fraudulent claims and we’re confident that we’ve prevented large amounts of fraud.

“Our post-payment compliance checks to recover money paid out are set to begin, with the focus on those who claimed despite having no active business.”

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