HMRC’s Strengthened Reward Scheme | Whistleblowing to Expose Company Tax Evasion & Avoidance
The Chancellor has announced a proposed ‘Strengthened Reward Scheme’ to encourage and financially reward individuals who report serious tax evasion or avoidance to HMRC, in cases which result in the recovery of unpaid tax which exceeds the sum of £1.5million.
This Scheme is designed to bolster the Government’s efforts to ensure compliance with the prevailing tax regulations and reduce the substantial ‘tax gap’ between the amount HMRC estimates is due and the amount actually recovered. While the precise figure varies between estimates, the gap is likely to be at least £40 billion.
The Scheme is intended to specifically target tax evasion by companies, wealthy individuals and tax avoidance schemes, and is based on the model adopted by the US Internal Revenue Service.
Tim Thompson, Partner and Head of Tax Litigation at KANGS outlines these proposals and explains how we can assist individual and corporate taxpayers who may be investigated by HMRC as a result of a report by a whistleblower.
Potential Incentives for Informants
Current Incentives
HMRC operates a discretionary payment scheme to financially reward informants. However, the criteria for payment is unclear and there is no set formula regulating the level of reward in relation to the amount recovered.
In reality, very limited payments are actually made, with HMRC reporting that less than £1million was handed out in 2023/24. Furthermore, HMRC has engaged in very little marketing, resulting in very few potential whistleblowers having come forward to participate in the scheme.
The Reward Scheme
Whilst still awaiting further details, it is currently proposed that a whistleblower may be offered between 15% and 30% of tax recovered over £1.5million as the result of the information they provide. However, any such payment will remain discretionary and is not guaranteed.
Clearly, the payments being proposed could constitute life changing amounts to recipients and will potentially attract the attention of many more whistleblowers, which, of course is the Government’s intention.
Reporting to HMRC
Where it is suspected that an individual or business is deliberately avoiding paying tax, the relevant information should be reported to HMRC through its existing reporting service, which requests the following limited information:
- the type of activity,
- how knowledge of the activity became known,
- the relationship with the individual or business being reported,
- how long it has been going on,
- the total value, or estimation, of the avoidance.
Exclusions from Eligibility for a Reward
Eligibility will be excluded where:
- the information was obtained by civil servants or government contractors who obtained information through their work,
- the taxpayer is involved in, or planned and started the tax evasion or avoidance,
- the information is already known to HMRC or could have been identified through routine processes,
- the reward might directly or indirectly fund illegal activity,
- the informant was required by law to disclose, or not disclose, the information,
- the whistleblower is acting on behalf of someone else,
- the information comes from someone who would not be eligible for a reward,
- the information is provided anonymously.
Important Considerations
HMRC has also announced new powers against promoters of tax avoidance schemes and is establishing a ‘small business evasion team.’ The Criminal Finances Act 2017 imposes criminal liability upon corporate entities for failing to prevent tax evasion. Accordingly, amongst other precautionary measures which should be taken, businesses should assess whistleblowing policies to enable employees to report concerns internally before turning to HMRC.
Any employee who suspects serious fraud should seek immediate legal advice before making any form of disclosure. A potential whistleblower needs to ensure they do not breach confidentiality or data protection laws which, without guidance, could place their employment or legal position in jeopardy.
How Can We Assist You?
Guidance for Whistleblowers
Whilst the potential for financial reward may be appealing to a whistleblower, the Scheme currently presents immediate causes for concern and caution.
As anonymous reporting will exclude the possibility of reward, HMRC states that any information provided through its portal will be ‘private and confidential.’ However, this may cause issues where, for example, an informant is subsequently required to provide formal evidence as a witness.
Therefore, although the team at KANGS does not act for whistleblowers as we only act for corporate and individual taxpayers, it is highly recommended that expert legal advice is sought prior to whistleblowing to ensure that your rights are protected.
Guidance for Companies
If you or your company are being investigated by HMRC, the specialist tax solicitors at KANGS have extensive experience handling a wide range of tax disputes. It is essential to seek expert advice as soon as you become aware of any potential issue with HMRC.
Whether you are already engaged in an HMRC investigation, or you expect one to arise, contact us immediately. You can reach our team using the contact details below.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
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