Last year, HM Revenue and Customs (HMRC) paid out £508,500 to whistleblowers who reported their ex-spouses and former employers for tax fraud. This marks a 75% increase in payouts over the last five years, based on data obtained through a Freedom of Information request.
HMRC encourages taxpayers to report individuals or businesses they suspect of underpaying taxes or committing fraud. Each year, tens of thousands of disgruntled employees and former spouses heed this call, resulting in the taxman receiving 73,000 whistleblowing reports in 2019-20. Recent reports include employees exposing their employers for furlough fraud, possibly contributing to the rise in payouts.
Concurrently, HMRC has increased the number of “dawn raids” it conducts as part of its tax fraud investigations. In the last year alone, officers in HMRC’s Fraud Investigation Service searched 623 properties, representing a 36% annual increase.
Over the past five years, over £2 million of taxpayers’ money has been spent as rewards for tax fraud tip-offs. However, HMRC only offers payments on a discretionary basis when the information leads to the recovery of unpaid tax.
Experts argue that the Government should be more transparent and generous in its reward system for tax fraud tip-offs. Michelle Sloane, a representative from the law firm RPC, suggests that a formal and transparent system could incentivize more people to come forward and report tax evasion.
With the “tax gap” amounting to £36 billion – which represents the tax lost to errors or criminal activity – HMRC faces pressure from MPs to increase its tax yield. Earlier this year, the Public Accounts Committee criticized the tax office for its “lack of ambition” in tackling fraud and error.
An HMRC spokesperson stated, “There will be occasions when it is appropriate for us to award payments to individuals for providing information that helps us combat avoidance and evasion. We make these payments at our own discretion, based on the results achieved as a direct outcome. We highly appreciate the information we receive from the public and business community and urge anyone with knowledge of tax fraud to report it online through Gov.uk by searching ‘report fraud HMRC’.”
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