HMRC’s newly strengthened tax informant reward scheme – unveiled in last month’s budget and introduced with immediate effect – is facing an early backlash from business owners who warn it could trigger a wave of malicious claims and cost the tax office far more than it recovers.
The scheme gives HMRC the power to pay whistleblowers 15-30% of additional tax collected above a minimum threshold of £1.5m, without penalties and interest. Officials say the measure is directly aimed at uncovering credible information about offshore structures, aggressive evasion schemes, large corporations and ultra-high-net-worth individuals.
But business leaders worry that the size of the potential award will entice disgruntled former employees, fired consultants, competitors and even ex-spouses to file false or vindictive reports, leading to lengthy, costly investigations that fail to produce meaningful tax refunds.
HMRC emphasizes that rewards are discretionary and not guaranteed and could take years to materialize due to the complexity of important tax cases. But critics argue that this very long delay – and the obligation to investigate every claim – will result in significant operational burdens and unnecessary costs.
Tony Redondo, founder of Newquay-based Cosmos Currency Exchange, said the plan’s premise was understandable – but the unintended consequences could be serious.
“In theory the Strengthened Reward Scheme is a no-brainer. But in practice I fear a lot of time and expense will be wasted on false investigations, as disgruntled ex-employees, embittered ex-spouses and sacked advisers lure their targets with exaggerated, malicious or downright vindictive tips. HMRC will have to sift through all this and taxpayers will pay for it.” Invoice.”
Sam Alsop-Hall, chief strategy officer and co-founder of Birmingham-based Clive Henry Group, said the policy was to import the worst elements of whistleblower culture – without adequate safeguards.
“HMRC’s plan risks turning taxpayers into bounty hunters and that cannot happen without strong safeguards. People can literally make things up, drag others through lengthy processes and even to court, with little or no evidence.”
The emotional and reputational damage is enormous – and once financial incentives are added, the risks grow even further.”
Alsop-Hall called on HMRC to set out how unfounded allegations will be filtered out and what recourse or support there will be for individuals and businesses who are unfairly targeted under the system.
Although the system targets large and complex cases, business leaders warn that speculative claims may not respect these boundaries – and any claim, however flimsy, requires time, attention and often cooperation with the defendant from HMRC.
SMEs fear the system could create an environment where unsubstantiated claims can lead to intrusive controls, reputational damage and costly fees, even where there is no wrongdoing.
HMRC has been asked to provide further clarification on safeguards and oversight mechanisms.
