The Public Accounts Committee report said that Revenue & Customs tried to recover an estimated 2.2bn in 2004/05.
The NDNA said that paying tax credits directly to providers would ensure that parents were receiving the correct entitlement, reduce fraudulent claims and help to prevent a build-up of bad debts for nurseries.
Purnima Tanuku, NDNA chief executive, said, 'Tax credits are an important way of helping families to access high-quality childcare, but the current system is both bewildering and open to fraud.'
Karen Walker, director of the Children's Place, a chain of eight nurseries in Yorkshire, told Nursery World that the levels of debt were highest in the company's Neighbourhood Nurseries, where more parents are tax credit claimants.
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