HM Revenue and Customs (HMRC) has announced that it has shut down its online application website as a result of a £30m fraud.

The department said that it has identified and prevented attempts to defraud the Tax Credits system by making claims through the tax credits e-portal. As a result it has closed the site while it develops new checks to ensure greater security.

A criminal investigation has been launched into the possible misuse of a number of Department for Work and Pensions (DWP) staff identities in fraudulent tax credit claims. The fraud relates to internal information held about staff and not the external records held by the DWP.

HMRC stated that the problems do not relate to issues with the IT system supplied by EDS, which last week agreed to pay compensation of £71m over problems with the Tax Credits system.

HMRC has set up a dedicated helpline for any DWP staff who believe that they may have been affected.

David Laws, Liberal Democrat Shadow Work and Pensions Secretary, said that he suspected the level of fraud to be much higher than £30m and called on the government to make a statement.

"This complicated and chaotic system is wide open to fraud. Ministers have known for some time that organised criminals were using the internet to defraud the system," he said.

"Ministers must now make a statement, firstly as to why they have taken so long to deal with the problem and why such drastic action is necessary.

"Many perfectly honest families will be applying via the internet and will be forced to join the massive queue of people hoping to speak to an adviser on the tax credit helpline."