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The UK government has unveiled a new whistleblower incentive scheme, promising significant financial rewards for individuals who expose tax fraud and avoidance by wealthy individuals and multinational corporations.
The Treasury’s initiative, modeled on the successful US system, aims to strengthen tax enforcement by offering informants up to 25% of additional tax revenue recovered due to their disclosures. This policy shift underscores the government’s push to close the tax gap, which currently stands at £6.5 billion annually.
How the Scheme Compares to the US Model
The US Internal Revenue Service (IRS) has long operated a robust whistleblower program, paying out $89 million (£68 million) to 121 informants in 2022-23, with individual payouts averaging $735,537 (£568,000). In a landmark case last year, three whistleblowers split a $74 million (£57 million) reward after aiding the IRS in recovering $263 million from a single taxpayer.
By contrast, HM Revenue & Customs (HMRC) awarded just £978,256 in whistleblower payments in 2023, with no transparency on the number of informants rewarded or the total tax revenue recovered. The new Treasury-backed scheme seeks to scale up incentives and align the UK’s approach with international best practices.
Key Features of the UK’s New Whistleblower Program
- Incentive Structure: Whistleblowers will receive 10% to 25% of additional tax recovered.
- Larger Payouts: Ministers aim to increase payments significantly to encourage high-value disclosures.
- Protection Measures: The government pledges stronger anonymity safeguards to protect informants from retaliation.
- Cost-Effective Policy: The scheme is designed to generate more tax revenue than it costs in payouts.
Experts Weigh In: Will It Work?
Andrew Park, tax investigations partner at Price Bailey, argues that current UK rewards are too low to incentivize serious whistleblowers, particularly those involved in major fraud cases.
“The people in a position to report large-scale fraud often face serious risks. They need a substantial financial incentive to come forward,” Park stated. “The US model proves that significant sums can be recovered by properly rewarding informants.”
A major criticism of the existing system is that HMRC is inundated with low-level, often unfounded reports, rather than major fraud cases. Experts suggest that raising reward levels will help focus efforts on high-value investigations.
Government’s Justification for the Policy Shift
Exchequer Secretary James Murray defended the move, stating:
“Tax fraud is a crime that robs honest taxpayers. Our new approach aligns with successful models in the US and Canada, ensuring people are incentivized to report tax avoidance. This will help grow the economy and put more money in people’s pockets.”
The Treasury is also investing £1.4 billion over the next five years to bolster HMRC’s enforcement capabilities, a move aimed at recovering billions in lost tax revenue.
New Tax Relief for Side Hustles
Alongside the whistleblower scheme, the government has announced a major tax relief measure for individuals with side incomes from activities such as online selling, dog walking, or gardening.
- The self-assessment tax return threshold will rise from £1,000 to £3,000 by 2029.
- This change will exempt 300,000 people from filing tax returns.
- Around 90,000 individuals will have no tax liability at all.
- Others will be able to pay taxes through a simplified online system.
What’s Next?
The Treasury’s whistleblower program and side hustle tax relief mark significant shifts in the UK’s tax strategy. With increased enforcement and targeted relief measures, the government hopes to clamp down on tax evasion while easing burdens on small-scale earners. Further details on the implementation of these policies are expected in the coming months.
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