The Treasury has denied a fraud carried out on thousands of Network Rail staff shows the tax system is in crisis.
Fraudsters have targeted the online tax credit system
It followed a story in The Times which claimed one in seven Network Rail staff had had their identity stolen and used to steal millions from the Treasury.
Network Rail confirmed HM Revenue & Customs (HMRC) was investigating the fraudulent use of personal details of "significant number" of its workers.
The fraud is believed to have used the tax credit system's online portal.
The portal was closed down at the start of December, after another major fraud involving the theft of identity of Department of Work and Pensions staff was uncovered.
BBC News reported in October that the tax credit system was facing an assault from organised gangs, who saw it as a low-risk, high-return target for fraud.
At the time, HMRC said the organised fraud - which involved the theft of personal information of some 13,000 civil servants - had cost at least £15m.
According to The Times, Network Rail sent out a letter to all of its 30,000 staff alerting them to the Revenue probe.
The Times added that the case could turn out to be "Britain's biggest benefit scam" and the revelations had plunged the tax credit system into "chaos".
"Far from being in turmoil and weak, it's the opposite," a Treasury spokesman said of the system.
"The tax credit system is not open to fraud. HMRC were able to spot this fraud, shut it down and to warn Network Rail and the banks who weren't aware of the abuse."
The spokesman also said there was no evidence to support the implication in the Times article that insiders at HM Revenue may be involved.
News of the latest fraud come just days after the Treasury revealed HMRC halted 38,924 suspect tax credit applications between April and November last year.
More than half, HMRC said, were thought to be cases of organised fraud - with another 22,284 tax credit claims blocked at payment from October 2004 to November 2005.
Such frauds are carried out by criminals who steal an individual's name, date of birth and National Insurance number and use these personal details to steal money from the government by making fraudulent tax credit claims.
The Liberal Democrats on Wednesday called for an independent review into fraud of the tax credit system, describing this as "essential".
Tax credits, which were launched in April 2003, are designed to help working families on low incomes.