DWP refunds claimants after admitting fraud penalty errors

The Department for Work and Pensions (DWP) has handed back, or is handing back, money paid by claimants who accepted penalties instead of facing prosecution.

The penalties, known as administrative penalties, can be offered to people suspected of benefit fraud when investigators believe there is enough evidence for a realistic prospect of conviction.

They are calculated at 50% of the overpaid amount, capped at £5,000, and are charged on top of the original benefit overpayment.

But a DWP review found 197 cases where penalties had been unreasonably offered and should not have been issued.

This included 128 cases from 2023/24 and 69 from 2024/25.

The department said procedural errors, insufficient evidence and circumstances not being fully considered contributed to some of the cases.

A DWP spokesperson said: “In an effort to identify opportunities for improvement, we proactively reviewed our use of Administrative Penalties and identified a small number of cases where they were incorrectly applied.

 “We have put this right by removing and refunding those penalties, contacting affected customers, and strengthening our processes to ensure decisions are made consistently and appropriately in future.”

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DWP strengthens fraud checks

The department has introduced a series of changes following the review, including updated guidance for investigators, revised customer letters and communications, enhanced training and a new permanent independent decision-making panel.

It has also strengthened quality assurance and oversight and introduced mandatory two-investigator attendance at all Interviews Under Caution.

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Under the Public Authorities (Fraud, Error and Recovery) Act 2025, the DWP is also introducing independent inspection of end-to-end criminal investigations.

The department said cases from before 2023/24 were not included in the review and no further cases are being examined.

Importantly, having an administrative penalty removed does not cancel any underlying benefit overpayment.

Any outstanding overpayment will still need to be repaid.