HMRC launches US-style ‘reward’ scheme for exposing tax dodgers
HMRC is launching a new “reward” scheme for people who report tax avoidance or evasion, similar to the system used by the US Internal Revenue Service (IRS).
Tipsters who provide information leading to the collection of unpaid tax can receive 15 to 30 percent of the recovered funds, before penalties and interest.
However, the scheme is only aimed at people with knowledge of serious tax evasion, i.e. £1.5 million or more. This means successful whistleblowers could receive up to £450,000 for reporting to HMRC, before penalties and interest.
This is similar to the IRS reward plan, which also pays whistleblowers 15 to 30 percent of the additional tax collected. From October 2022 to September 2023, the American tax office paid 121 rewards to whistleblowers, totaling $88.8 million. This was much lower than the 6,455 applications received at the time.
HMRC says this level of tax avoidance often involves large companies, wealthy individuals and offshore or avoidance schemes.
The tax authority lays down various criteria that prevent the whistleblower from receiving a reward; these include:
- Being a public official at the time the information was obtained (even if not anymore)
- Being a taxpayer involved in evasion or evasion
- The information was already known to HMRC or may have been identified through routine processes.
- reward may lead to financing of illegal activities
- information is provided anonymously
However, anyone with knowledge of tax avoidance is asked to report it, even if they are not eligible for a reward.
HMRC added that it would contact everyone who contacted them if they needed further information and if they were eligible for a reward. However, he adds that investigations could take “years” so compensation should not be expected immediately.
The awards scheme is now live, starting on 26 November, following Labour’s second autumn budget.
Paul Dowling, partner in Leigh Day’s International Corruption and Whistleblowing team, said he had already seen interest from potential whistleblowers seeking advice.
Mr Dowling said: “Whistleblowers can face retaliation, blacklisting or loss of reputation. Whether it is an Employment Tribunal claim, civil action or a complaint under the Whistleblower Rewards Scheme, they need expert guidance from the outset on how to utilize the legal mechanisms available to protect their rights and secure appropriate remedies.
“This proposed HMRC scheme represents a transformative step towards ensuring stolen tax revenues are returned to the public coffers. Rewarding those who come forward reflects the critical performance of public service whistleblowers in exposing serious abuses.”
Three years ago it was reported that HMRC estimated tax evasion costs £5.5bn a year. A spokesman said: “The government has strengthened our scheme to reward whistleblowers to encourage reporting of suspected high-value tax evasion and tax avoidance.
“We value the information we have received and urge anyone with information about tax fraud to report it to us online by going to GOV.UK and searching for ‘report fraud HMRC’.”
