HMRC doubles payouts to tax whistleblowers amid calls for larger rewards

HMRC nearly doubles payouts to tax whistleblowers to £1m, but experts call for larger, proportionate rewards to close the £39.8bn tax gap and encourage more high-quality tip-offs. Read more: HMRC doubles payouts to tax whistleblowers amid calls for larger rewards

Nov 21, 2024 - 14:00

HMRC doubles payouts to tax whistleblowers amid calls for larger rewards

HM Revenue & Customs (HMRC) has nearly doubled the amount paid to individuals providing tip-offs about suspected tax evasion, disbursing almost £1 million (£978,256) in the 2023/24 financial year compared to £508,500 the previous year.

The increase comes amid growing pressure to reduce the UK’s £39.8 billion tax gap—the difference between the tax that should be collected and what is actually received.

According to data obtained under the Freedom of Information Act by accountancy firm Price Bailey, HMRC received 151,763 anonymous tip-offs via its fraud hotline in 2023/24, slightly fewer than the 157,270 reports in 2022/23 but still the second-highest in seven years.

Andrew Park, Tax Investigations Partner at Price Bailey, described the payouts as “paltry” when measured against the billions lost to tax fraud annually. He suggested that significantly increasing rewards could incentivize more individuals to come forward with high-quality information. “A transparent system in which the reward is proportionate to the amount of tax recovered would go a long way to encouraging big-ticket tip-offs,” Park said.

Price Bailey highlighted the contrast with the United States, where the Internal Revenue Service (IRS) offers substantially larger rewards. In the most recent financial year, the IRS paid out $89 million to 121 whistleblowers, leading to the recovery of $338 million in taxes—averaging $735,537 per whistleblower.

Park noted that the UK system is less transparent and that awards are discretionary and not linked to the amount of tax recovered. This lack of significant financial incentive, coupled with the potential risk to employment for whistleblowers—many of whom are employees of the companies they report—may deter individuals from reporting major tax fraud.

He also pointed out that the lengthy process of resolving tax disputes serves as an additional disincentive. “Anything HMRC can do to make its reporting system more accessible and transparent would be welcomed,” Park added.