HMRC's accounts for 2011/12 showed it overpaid around £2-£2.5 billion in tax credits and underpaid up to £290 million as a result of fraud and error, said the report by a National Audit Office.

A target of reducing the level of fraud and error to 5 per cent of tax credit entitlements was missed. Taxes totalling almost £5.2 billion were written

The chairman of the influential House of Commons Public Accounts Committee, Margaret Hodge, said she was shocked by ''the sheer scale of waste and mismanagement'' at HMRC