The United Kingdom is preparing to change its approach to combating tax evasion. His Majesty’s Revenue & Customs (HMRC) has announced plans to introduce a reward scheme similar to that of the United States, aimed at encouraging whistleblowers to report illegal tax activities. This new initiative targets serious noncompliance with tax obligations in the UK and aims to incentivize individuals, especially those working with high net worth individuals or multinational businesses, to report any illegal tax activities of their employers. The scheme is expected to be implemented later this year.
Currently, the UK’s approach towards whistleblowing lacks a structured framework across regulators and enforcement agencies. HMRC’s existing rules allow whistleblowers to report suspected tax evasion but offer financial rewards only on a discretionary basis, which are generally lower than those available in the US. As a result, few individuals have been willing to report suspicions of tax evasion, limiting HMRC’s ability to identify and prosecute such offenses. HMRC estimates an annual loss of up to 5.5 billion pounds in tax revenue due to this issue.
The new reward scheme will potentially offer whistleblowers up to 25% of any additional tax revenue recovered by HMRC from enforcement actions linked to their information. This model is inspired by successful programs in Canada and the US, where whistleblowers can receive between 15% and 30% of recovered amounts after providing credible information leading to significant recoveries. For instance, between 2022 and 2023, $89 million was paid out to 121 whistleblowers in the US, facilitating the collection of an additional $338 million in taxes.
This initiative aligns with efforts by other UK enforcement agencies like the Serious Fraud Office (SFO), which seeks similar schemes for incentivizing whistleblowers. Nick Ephgrave, head of the SFO, highlighted frustrations over UK nationals seeking rewards in the US due to a lack of incentives at home: “I happen to know that since 2012, 700 UK nationals have gone to America to whistle blow because they feel they cannot do it here because there isn’t incentivisation.”
When implemented, this reward scheme will provide significant financial motivation for reporting tax evasion. Similar schemes elsewhere have led to increased investigations and prosecutions. If adopted by entities like the SFO alongside new legal measures such as the ‘failure-to-prevent-fraud’ offense under the Economic Crime and Corporate Transparency Act 2023, it could further boost these efforts.
Businesses may need to review their compliance and whistleblower procedures accordingly.
