UK whistleblowers to receive hefty incentives for exposing tax fraud

Whistleblowers in the UK could stand to earn significant financial rewards for exposing tax avoidance and fraud under a new scheme outlined by the Treasury. Inspired by similar programmes in the United States, informants will be entitled to receive a share of the additional tax revenue raised, with payments ranging from 10% to 25% of the extra funds recovered by HMRC.

The current incentive system in the UK offers relatively small payments. Last year, HMRC awarded just under £1 million to informants, with no details disclosed regarding the number of individuals rewarded or the specific tax revenue raised. This figure starkly contrasts with the US, where the Internal Revenue Service paid out $89 million (£68 million) to whistleblowers in the 2022-23 fiscal year. In one standout case, a single case netted $263 million, and three whistleblowers shared $74 million in rewards.

The Treasury’s new approach is designed to address these discrepancies and encourage more individuals in key positions to come forward with information on major financial crimes. With anonymity guarantees already in place, authorities hope the significant increase in financial incentives will encourage people to take the risks often involved in reporting large-scale falsehoods, especially where organised crime may be a factor.

According to Andrew Park, a tax investigations partner at advisory firm Price Bailey, large tax frauds often require whistleblowers holding high-level roles. He explained that individuals in these positions need substantial motivation not only to risk their careers but also personal safety in certain cases. He pointed out that the current UK system has failed to attract reports of major frauds due to insufficient incentives, and often HMRC receives lower-level or vexatious claims instead.

The government’s plans align with its broader mission to close the nation’s tax gap, currently estimated at £6.5 billion annually. Ministers hope to improve tax collection without adding substantial administrative costs. They are committing £1.4 billion in additional funding for HMRC over the next five years to ensure greater efficiency and higher tax compliance rates.

In addition to these reforms, the government also intends to ease tax requirements for those earning supplementary incomes from side businesses or “side hustles.” By 2029, the threshold for requiring self-assessment tax returns will rise from £1,000 to £3,000 in revenue. This change will exempt hundreds of thousands of people from completing returns, streamlining the process and reducing the burden on taxpayers and HMRC. Instead, individuals earning below the new threshold will be able to pay due amounts through an online service, improving accessibility.

Exchequer Secretary to the Treasury James Murray described the scheme as a move towards fairness, helping to ensure everyone pays their share. He added that incentivising whistleblowers to report tax crimes would bring significant benefits to the UK economy, strengthening economic growth and delivering better outcomes for law-abiding taxpayers.