Tax snoops send record 165,000 tip-offs to HMRC

Telegraph

3 days ago

Do you have experience with HMRC's tax fraud tip-off system? Email: [e-mail].
HM Revenue and Customs (HMRC) received a record number of tip-offs last year from individuals snitching on friends, neighbours and businesses.
The tax office rewards informants who provide intelligence on possible tax fraud. In 2024-25, there were 164,670 reports to its fraud hotline channels, up 9pc year-on-year, according to analysis by accountancy firm, Price Bailey.
Data obtained under Freedom of Information rules shows the number of reports has hit an all-time high, yet payments have slumped for the first time in four years. HMRC awarded just £852,438 to whistleblowers last year, down 13pc since 2023-24.
The UK tax office currently has a much less generous reward scheme than its US equivalent, which has led to concerns that potential whistleblowers lack incentives to report cases of tax fraud.
HMRC only compensates informants on a discretionary basis depending on the amount of tax recovered and time saved in investigations.
By comparison, the Internal Revenue Service (IRS) awards between 15pc to 30pc of the proceeds recovered as a result of intelligence provided. It handed £123.5m to whistleblowers in the most recent financial year.
However, the IRS only pays an award if the amount recovered is more than $2m (£1.5m). In addition, if the fraud or evasion relates to an individual, then that individual must have a gross income of over $200,000 for at least one of the tax years in question.
Earlier this year, HMRC unveiled plans for a new reward scheme modelled off the IRS scheme, where informants receive a percentage of the tax recovered. This is expected by the end of the year.
HMRC said there is no direct connection between the number of reports received and the amount of money paid in a given year.
Andrew Park, of accountancy firm Price Bailey, said that discretionary payments meant there was little incentive to report tax fraud, particularly in complex cases where whistleblowers were also employees.
'While HMRC depends increasingly on taxpayer intelligence to close the £5.5bn tax fraud gap, the current reward system lacks both scale and clarity,' he said.
The proposed reward scheme is one of a number of measures aimed at reducing the so-called 'tax gap' – the difference between the tax HMRC should collect and the tax it actually collects.
About 60pc is attributed to small businesses with a turnover of less than £10m. The Treasury hopes to raise £7.5bn a year in extra tax by 2029-30 through its measures to reduce the gap.
John Hood, of accountancy firm Moore Kingston Smith, said: 'HMRC works closely with other tax jurisdictions across the globe, and will be painfully aware of the gulf between the effectiveness of the fraud hotline in the UK and in the US.'
He continued: 'In the US, whistleblowers are warned that they face penalties for perjury if the information is incorrect. The sum recovered needs to be more than $2m for an award to be made, and the whistleblower must wait until the tax owed has been recovered.
'Obtaining high quality, up-to-date information from whistleblowers will greatly assist HMRC's efforts to target high value tax avoidance and evasion.'
An HMRC spokesman said: 'The Government is strengthening our scheme for rewarding informants to encourage reporting of high value tax fraud and tax avoidance.
'We value the information we receive, and urge anyone with information about tax fraud to report it to us online by going to GOV.UK and searching 'report fraud HMRC'.'