The government's planned Universal Credit system will make it very difficult for small firms and the self-employed to keep up on the technology front, according to the Public Accounts Committee (PAC).
In a report on means tested benefits and the effect of the Universal Credit plan, the PAC says small firms "will find it hard" to integrate with new systems.
HMRC is developing a system of real-time information (RTI) which will gather monthly data on people's earnings from employers. This could allow benefit awards to be adjusted when earnings change, and therefore reduce the level of overpayments that can be created under the current tax credits system.
Approximately 94% of employees receive earnings electronically, but small businesses without electronic payroll systems and the self-employed do not currently submit monthly data to HMRC.
"HMRC told us that it is currently identifying how best to include the last 6 percent of employees (about 1.5 million people) and the self-employed in the RTI system, but the detail of how this is to be achieved remains to be worked through," said the PAC.
It warned there could be "billions of pounds of unanticipated overpayments" if claimants' details were not automatically updated when the Universal Credit regime came in.
The Department for Work and Pensions (DWP) is planning to issue a framework contract worth around £200 million for the supply of identity assurance services for 21 million benefits claimants to support Universal Credit. The framework deal will last four years with a possible two-year extension.