RPC said that pressure from the Treasury to increase the tax yield for the exchequer has caused a steady rise in HM Revenue & Customs (HMRC) payments to informants, which now totals £402,160, a 30% increase since 2011 when it stood at £309,620 .
The law firm claims that information or documents supplied by divorcees or former employees who may bear a grudge against the taxpayer, are often used as a source when investigating circumstances of tax evasion.
Tax partner at RPC, Adam Craggs, said HMRC does not widely publicise the fact it makes payments to informants because it is a controversial policy, and also because the body wants to avoid making payments unless it has to.
“If too many people know that they can get paid by HMRC for providing information, they may be less willing to provide information for free,” he said.
Although RPC has said disgruntled employees are sometimes used as a means to access information on underpaid corporation tax and the use of false invoices to conceal the actual profit of a company, most of the money paid to informants is related to personal tax evasion by wealthy individuals.
Increase transparency
With the Internal Revenue Service (IRS) in the US having established a policy in which whistle-blowers are paid up to 30% of the additional tax, penalty and other amounts it collects to informants, RPC has raised questions as to whether the UK should adopt a similar scheme to increase transparency.
Craggs said: “In the future, if HMRC decides to bring its policy more in line with the US system, then it’s important that there is proper accountability and that the public know how much is being paid, who it’s being paid to, and what it’s being paid for.”
Responding to the increase in pay-outs to informants, HMRC said: “Each year HMRC receives a great deal of valuable information from the public through our two designated hotlines, and the vast majority give that information without any expectation of any financial reward.
“However, there will be occasions where it is appropriate for HMRC to pay a reward to individuals in return for them providing us with important information.
“The payment of rewards is at the discretion of HMRC, and is based on what is achieved as a direct result of the information provided and a range of factors determine the amount.”
The tax authority outlined that these factors are related to the amount of tax recovered, the estimated loss of revenue prevented, and other measureable benefits, such as the time saved working on compliance cases.
