Furlough fraud: Can IT modernisation help find HMRC’s lost £27 billion?

furlough fraud
© Hon Chung Ham

Mike Kiersey, Principal Technologist, Boomi, details how HMRC can modernise their IT systems to help recoup the billions lost in furlough fraud

For decades, the UK public sector has been reliant on outdated legacy IT systems. Despite the sweeping shift towards digital transformation brought on by COVID-19, In a review of the tax authority’s performance for 2019-2020, HMRC was found to spend “too much of its IT budget on patching up legacy systems rather than modernising them”.

The Government body, like many others, finds itself in the middle of a challenging dilemma: build and integrate new systems to better modernise processes, or double down on keeping the lights on amidst uncertainty.

The solution to this dilemma is not straightforward, but it is clear that current systems cannot meet today’s needs. Recent reports indicate that up to £27 billion may have been lost from Government loan schemes during the pandemic as a result of furlough fraud.

The pandemic has shown us that public services have an urgent need for data that is accurate, accessible, and reliable. HMRC’s role in a time of economic strife has never been more important To bolster the effectiveness of operations and reclaim billions of tax-payers money lost to fraudsters, HMRC is going to have to fast-track the move towards becoming a fully digital tax system.

Solving the legacy obstacle

Legacy technologies continue to underpin many of the IT systems in place across HMRC and the wider UK public sector. In several instances, these have remained unchanged since their first implementation – meaning that some public sector bodies have been using the same systems for four or five decades. When we compare the speed of operations now with the volume of data that runs across these systems, that is frankly not good enough.

Legacy systems at the core of public sector bodies are costly to operate, outdated and unable to link with other technologies, having been built independently and iteratively. This creates siloed departments and, at a smaller level, silos within departments, which hinder the ability to process the millions of datasets internally.

The single most significant outcome of legacy technologies is that it creates technical debt, making it difficult to collect, maintain and share data, preventing it from being put to new, innovative uses that could help public services and save taxpayer money. HMRC runs on data to efficiently tax enterprises and individuals. If this data is stored incorrectly or siloed away in the architecture, the end result is an inefficient system and revenue lost.

Furthermore, as long as legacy remains in use, the door will be open for cybersecurity breaches. This is perhaps best illustrated by the WannaCry ransomware attack in 2017, when cybercriminals exploited a major vulnerability in NHS legacy IT systems – leading to a repair bill in the tens of millions.

Continuing to rely on legacy systems will hamper HMRC’s capability to modernise, and as the pace of IT continues to accelerate significantly, serious decisions need to be made to address this.

Future-proofing IT

Ultimately, digital transformation is a delicate process, and one that needs to be carried out over a period of months and years. However, if HMRC can efficiently modernise their data practices in the coming months, it will be able to put a framework in place to become a digitally native tax administration to successfully recoup the billions of pounds lost to furlough fraud during the pandemic.

For the organisation to deliver on its 2015 promise to ‘become one of the most digitally advanced tax administrations in the world’, data will need to be  transparent, trustworthy, and easier to share.

This will mean embracing new technologies that deliver long-term ROI across the board. While this may seem like a tall order, there are increasingly more sophisticated solutions available to IT decision-makers, with tools such as integration platform as a service (iPaaS) allowing a seamless transition away from legacy.

If the impact of the last 18 months has taught us anything, it’s that under the right circumstances, innovation is achievable. At a time when the country needs stability more than ever, future-proofing IT across HMRC and the wider public sector will go a long way to helping achieve this.


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