Businesses called to reinforce tax compliance as Treasury plans for new whistleblower rewards announced

As the Treasury announces generous new financial incentives for tax whistleblowers, Tax Investigations specialist Andrew Park, Partner at Price Bailey, expects to see increasing anxiety among business owners.

This week, HM Treasury announced plans to introduce a new whistleblowing scheme modelled on the highly successful US programme, where informants are paid up to 30% of the tax recovered from a claim.

Rumours indicate the level of payments under consideration could reach up to 25% of any tax recovered and it is understood that the scheme will not be limited to reporting fraud but will also reward the reporting of failed tax avoidance.

While the UK has seen a steady increase in the value of payouts for those who report tax fraud, payouts have been rare and meagre compared to those seen in the US, according to Tax specialist at Price Bailey, Andrew Park.

Park comments:

Despite HMRC receiving over 150,000 reports last year, payouts reached just £978,256, a much smaller figure than those seen in the US.

For HMRC, the changes announced make sense and should provide sufficient incentive and reward for personal risk, for people to report serious non-compliance that would otherwise go undetected. But the potential “lottery win rewards” for whistleblowers will increase the incidence of organisations being falsely accused and will also affect those who may unknowingly have fallen out of compliance.

He adds:

At the moment HMRC doesn’t have a structured whistleblower programme. They pay out very small amounts, paltry sums. What that means in practice is it’s not much of an incentive to blow the whistle on major fraud or non-criminal non-compliance. At present HMRC receives a lot of vexatious reports – divorces, people falling out with neighbours, disgruntled low-level employees with little actual knowledge of all the facts. The change will inevitably lead to a huge increase in whistleblowing, especially in high-ticket cases, to HMRC from within large organisations.

It is now going to be even more important that organisations seek advice early about any tax positions that could be challenged by HMRC with a view to making pre-emptive voluntary disclosure to HMRC if necessary, before an employee takes the opportunity out of their hands. Any businesses in any doubt about their tax compliance should not leave that as an open question and should seek support.

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