Last year, HM Revenue and Customs (HMRC) paid out £508,500 to informants who reported their ex-spouses and former employers for tax fraud. According to data obtained through a Freedom of Information request, the payouts to informants have increased by 75% over the last five years.
HMRC encourages taxpayers to report individuals or businesses suspected of underpaying taxes or engaging in fraudulent activities. In the 2019-20 fiscal year, approximately 73,000 whistleblowing reports were received by the tax authority, including reports by disgruntled employees and former spouses.
Recently, employees have been reporting their employers for furlough fraud, which may have contributed to the increase in payouts. To investigate tax fraud, HMRC’s Fraud Investigation Service has been conducting more “dawn raids,” with a 36% annual increase in property searches, totaling 623 searches last year.
Over the past five years, over £2 million of taxpayers’ money has been used to reward tax fraud tip-offs. However, these payments are only made at the discretion of the tax office and are contingent upon the recovery of unpaid taxes.
Experts suggest that the government should be more transparent about how it rewards informants and offer more generous payouts. Michelle Sloane from the law firm RPC stated that a formal and transparent system could incentivize more people to come forward and report tax evasion.
HMRC is under pressure from MPs to increase its tax yield as the “tax gap,” which refers to the amount of tax lost to error or criminality, stands at £36 billion. Earlier this year, the Public Accounts Committee, a group of influential MPs, criticized HMRC for its “lack of ambition” in combating fraud and error.
A spokesperson for HMRC stated that they make payments to individuals who provide information that helps tackle tax avoidance and evasion on a discretionary basis. They value the information received from the public and business community, and encourage anyone with information about tax fraud to report it online through Gov.uk by searching “report fraud HMRC.”
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