HMRC paid over £500,000 to whistleblowers in the past year
Figure has increased, but is just 1.7% of that paid to informants by the IRS in the US
HMRC needs to make reporting system more accessible and payments more transparent to encourage more informants against tax fraudsters
HMRC has paid out over £509,000 to individuals providing evidence about tax fraud over the past year1 up from £495,000 in 2021/22 and up 75% from the £290,000 paid five years ago, according to research by international law firm, RPC.
Adam Craggs, Partner and Head of RPC's Tax, Financial Crime and Regulatory team, says that HMRC payments to informants is small given the size of the UK tax gap and the Exchequer could benefit from adopting the US approach of offering far more generous awards to those who 'blow the whistle' on tax evaders.
The US Internal Revenue Service (IRS) pays whistleblowers 15-30% of the additional tax collected through investigations instigated as a consequence of information received. In 2022, $37.8m was paid by the IRS to 132 whistleblowers - 58 times the amount paid to UK whistleblowers. In the same period, the IRS received 5,084 submissions and 12,597 claims for reward 2. A single submission to the IRS Whistleblower Office can be used to report more than one taxpayer.
Adam Craggs adds that one way to encourage more information in relation to tax fraud would be to increase transparency regarding how the reward system operates and how much money is paid to informants and the number of awards made.
“More individuals, with evidence of serious tax fraud, would come forward if they knew they could be in line for a life-changing amount of money.
“Paying a proportionate amount for high quality information that helps secure criminal convictions and the recovery of substantial amounts for the Exchequer would be a sensible step. HMRC has been making payments for information on an ad hoc basis for many years and would benefit from improving the system and placing it on a more formal basis.
Michelle Sloane, Partner at RPC adds: “HMRC should increase the incentive and transparency it uses when it comes to whistleblowers. People aren’t aware of the cash incentives that exist for additional tax collected as a consequence of information received. A more formal and transparent system might incentivise a greater number of people to come forward and report tax evasion.”
Michelle Sloane concludes, saying many of the whistleblowers in these cases are likely to be coming internally from businesses, such as disgruntled current or former employees or former partners and spouses.
1 Year-end March 31
2 IRS Whistleblower Office Fiscal Report, 2022