HMRC pay to informants hits record high

Payments made by HMRC to informants have hit a record high in the past year*, reaching £605,000, up from £402,000 in the previous year, according to City-headquartered law firm, RPC.

RPC says that the jump in the amount of money being paid to informants has been partly driven by a surge in public awareness about HMRC’s efforts to track down tax evaders.

Increasing public awareness of tax evasion has led to more individuals spotting an opportunity to alert HMRC to possible tax evasion by former employers or ex-spouses, as well as, other potential tax evaders. RPC explains that the typical profile of an informant has changed, with more individuals working in financial and professional services increasingly offering up information, in the hope that HMRC will pay them for such information.

RPC adds that HMRC is also under increasing pressure to make the most of information that is offered to them. It was heavily criticised after an incident in 2010 when a spread sheet known as the "Lagarde list", containing the details of 2,000 potential tax evaders, was handed over by the former French Minister of Finance (Christine Lagarde) and remained unused for two years. It eventually resulted in just one prosecution for tax evasion. 

The "Lagarde list" is part of a much larger data set, known as the "Falciani list". Hervé Falciani, a computer technician at HSBC, allegedly stole data from HSBC before it was seized by French police after a raid on his home.

Another contributing factor to the record high level of payments to informants is the pressure from the Exchequer for HMRC to increase the tax yield. HMRC is looking for alternative ways to bring more money into the exchequer and information purchased from the public is proving an ever more popular method to track down tax evaders and increase revenue.

RPC says that as the quality and accuracy of information provided by informants improves – particularly information from individuals in financial services and professional services who will often have first-hand insight into the tax affairs of individuals and businesses – HMRC is demonstrating its willingness to invest more money in informants.

Adam Craggs, Tax Partner at RPC, comments: "HMRC does not widely publicise the payments it makes to informants. If too many people know that they can get paid for information supplied to HMRC they may be less willing to provide information for free."

"The sharp rise in payments is likely to be due to greater public awareness of HMRC’s pursuit of tax evaders. However, many members of the public have an unrealistic view of the value of their information."

RPC explains that in the US, there is a clearly stated policy of paying whistleblowers up to 30% of any additional tax, penalty and other amounts the IRS collects. This raises the question of whether the UK might set up a similar scheme with a clearly set out incentive for informants.

Adam comments: "HMRC is taking inspiration from the US investigatory procedures in a number of areas. The system for paying informants in the future could become very similar to that operated in the US, which could potentially encourage more informants to come forward."

*Year end March 31st 2015