HMRC is considering using private companies to help in its work to reduce tax credits fraud and error, following a short trial of a commercial service earlier this year.

HMRC ran a small-scale trial from May to July 2013 with Transactis and sub-contractor Bosch. While the department has yet to release full details of the exercise, it says £20m of potential losses were identified, with 16,000 cases reviewed of which 5,500 contained error and fraud.

HMRC said the trial demonstrated the potential for 'significant benefits' through the use of private supplier technology, such as sophisticated data analytics, and it is now exploring the types of service the commercial sector can offer on a larger scale.

As part of this, HMRC says it is engaging with potential suppliers to gain an understanding of indicative costs, benefits and timelines ahead of an invitation to tender. This includes a focus on potential funding models which could include using a 'payments by and from results' model.

HMRC already works with the private sector in areas such as debt collection and identifying high-risk tax credits claims. It says a similar arrangement could be used to increase capacity to handle tax credits compliance interventions. Error and fraud in this area is at its lowest level since the introduction of the tax credits system in 2003, but still amounted to £2.09bn in 2011-12.

Suppliers interested in tendering will be invited to express an interest in attending an Error and Fraud Adding Capacity Event HMRC will be holding later this year.