U.K. tax credits site to stay closed after fraud

Web site shut down by fraudsters in 2005 won't be back online before next summer, may never be reopened, U.K. government says.

A U.K. tax credit Web site that was closed down by fraudsters in 2005 will not be back online before next summer at the earliest and may never be reopened, the British government has admitted.

The HM Revenue and Customs (HMRC) portal was targeted by criminals who stole the identities and personal details of almost 13,000 staff at the Department for Work and Pensions and Network Rail and exploited poor security and ID checks to make fraudulent online claims for tax credits.

Dawn Primarolo, the government's paymaster general who is responsible for the tax service, told members at a Parliamentary Treasury select committee hearing last week that the tax credits Web site will not be reopened before next summer--almost three years after it was shut down.

"The department advised me that by the summer of 2008 the necessary IT and identification checks built into the system will be available and it could reopen then," Primarolo said.

But she also acknowledged concerns from committee members that the Web site is too high risk to ever be reopened.

"My judgment is that without proper identification checks on the e-portal it should not be reopened," she said.

Some parliament members also criticized HMRC for ignoring advice and guidelines from the U.K.'s Office of the E-Envoy on setting up a secure government service online.

Sarah Walker, director of benefits and tax credits at HMRC, said the department took the approach of monitoring the Web site closely for signs of fraud. "We were trying to strike a balance all the time between making the system as accessible as we could for genuine claimants at a stage where this was a new system, and we were trying to make it easy for people to get into it while monitoring any signs of persistent fraud in the system," she said.

During the hearing, HMRC officials claimed the department's IT systems are stable and "working well" but admitted there are "still more day-to-day problems than we would like, which affect individual cases."

One of the most recent problems with the tax credits IT systems is HMRC staff being forced to make manual payments as a result of an IT upgrade last November. Around 11,000 payments have had to be made manually because of that IT problem, which is due to be fixed in April.

HMRC negotiated a compensation with Electronic Data Systems over the problems with the system the U.S. IT supplier developed to support the launch of tax credits in 2003, which were designed to help low income families back into work or after the birth of a child. EDS so far has paid 26.5 million pounds ($51.5 million), with the rest dependant on the IT company winning future contracts from the U.K. government.

Andy McCue of Silicon.com reported from London.

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