UK tax office offers US-style whistleblower rewards

By Kirstin Ridley

LONDON (Reuters) -Informants who blow the whistle on serious tax avoidance or evasion in Britain could be awarded up to 30% of the tax collected under a novel, U.S.-style reward scheme outlined by the UK tax authority HMRC on Wednesday.

HMRC said such tax offences normally involved large companies, wealthy individuals or offshore avoidance schemes. But taxpayers involved in the schemes, anonymous tipsters and those acting on behalf of others would be among those excluded from the programme, it added.

Finance minister Rachel Reeves heralded the move in her second annual budget, in which she unveiled annual tax rises worth an annual 26.1 billion pounds ($34.5 billion) to meet her deficit-reduction targets.

Britain's tax gap is in sharp focus. The country lost an estimated 46.8 billion pounds in unpaid tax for the 2023-2024 tax year, HMRC data shows, with 5.5 billion lost to tax evasion in 2022-23 - a figure lawmakers have said is probably a vast understimate.

U.S. agencies have awarded whistleblowers billions of dollars collectively for tips resulting in enforcement action.

But in Britain, there have been only limited payouts for informants, although the Serious Fraud Office (SFO) has called for whistleblowers to be financially rewarded for tipoffs that can risk their jobs, careers and sometimes their lives.

HMRC said under its strengthened reward scheme, informants could get between 15% and 30% of the tax collected, excluding penalties and interest, if tipoffs lead to a collection of at least 1.5 million pounds in tax.

However, payouts will be handed out at the agency's discretion and are not guaranteed, it said.

Judith Seddon, a partner at law firm Ashurst, called for a broad consultation into how the scheme would work and clarity on eligibility requirements to avoid cases from collapsing due to procedural weaknesses or unclear processes. 

"The government has been signalling for some time that it wants to close the 'tax gap' and this whistleblowing incentive is a clear effort to support that objective," she said.

Nick Barnard, a partner at law firm Corker Binning, noted that such a scheme would demand hefty resources to investigate reports that would vary in quality from "good, to well-meaning but unfounded, to out-and-out vexatious". 

"Whilst whistleblowing might seem like a no-lose situation, it is not. HMRC should know better than anyone that there is no such thing as a free lunch," he said.

($1 = 0.7566 pounds)

(Reporting by Kirstin Ridley; Editing by Chizu Nomiyama )