Treasury to launch tax whistleblowing scheme

In the UK, the ‘tax gap’ for the 2022/23 tax year was estimated to be £39.8 billion. This is the amount of tax that wasn’t paid, largely through to avoidance and evasion. To help shrink that figure in future years, HMRC has announced a new tax whistleblowing scheme.

The new tax whistleblowing scheme has been influenced by an established one in the USA. Over there, there’s a longstanding Inland Revenue Service (IRS) Whistleblower Office. Essentially, any citizen can inform on companies or individuals not paying their fair share of tax. In return, the whistleblower gets a cut of any unpaid tax the IRS retrieves. This is generally between 15 and 30 per cent.

What’s the current system in the UK?

Currently, some whistleblowers do get paid in the UK. According to City AM  in 2023, HMRC had paid out £509,000 to people who supplied evidence about tax fraud in the previous financial year. According to HMRC’s website:

“In some cases HMRC can pay rewards. These are given at HMRC’s discretion and are not guaranteed. To be considered for a reward, you need to provide your contact details.

“HMRC cannot provide any feedback on your report. If you are suitable for a reward, we will contact you.”

In other words, there is no guaranteed incentive for tax whistleblowing.

What is the new tax whistleblowing scheme?

A government press release from HM Treasury and Exchequer Secretary James Murray, MP, says:

“Murray will also announce a new reward scheme for informants to be launched later this year. This will look to target serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes. The scheme will take inspiration from the successful US and Canadian ‘whistleblower’ models and will complement the existing HMRC rewards scheme.

“Informants could take home a significant amount of compensation. This will be equal to a proportion of the tax take, ensuring that the scheme raises more money that it costs. Work is ongoing within the government regarding what percentage this could be.”

That said, The Times has since reported that tax whistleblowers will get up to 25% of any tax recovered due to their information. We’ll know whether that is correct later this year.

How effective will a tax whistleblowing scheme be?

While we can’t predict exactly how effective the new tax whistleblowing scheme will be, we can get an idea by looking at stats from America’s IRS Whistleblower Office. According to LBC, the IRS paid out $89 million to 121 whistleblowers during 2022/23. That’s an average of if $735,537 each – a significant incentive.

Paying informants seems to be very effective. In the same financial year, whistleblower information led to an extra tax take of $338 million. Incredibly, in 2024, a single individual was forced to pay up $263 million. That meant three informants split a £74 million reward.

Calling out tax cheats isn’t without risk. In some cases, whistleblowers may face reprisals from the person they’ve informed on. In other instances, a whistleblower may be indirectly involved in the fraud they report. A good example would be employees who blew the whistle on employers who were involved in COVID-19 furlough fraud. Because whistleblowers don’t currently have immunity from prosecution, it will be interesting to see whether the new scheme will offer any protections.

As we’ve learned, the new tax whistleblowing scheme launches later this year. We’ll let you know further details when we have them. In the meantime, if you’re looking for legal and legitimate ways of reducing your tax bill, ask us about our tax planning services.