It has always been possible to grass someone up to HMRC if you suspect, or actually know, that they are avoiding tax payments. But it isn’t common knowledge that HMRC will pay you for this information.
Obviously they would rather keep getting tip offs for free, but HMRC’s total payments for insider information rose from £402,000 last year to £605,000 this year. The publicity surrounding recent high profile cases has had a twofold effect on increasing HMRC’s desire for information. Firstly, it has put a lot of pressure on HMRC to be seen to vigorously tackle tax avoiders. Secondly, the general public are more educated in the definition of dodgy tax affairs and that it is a high priority issue for HMRC.
Payments are decided on an individual basis and correlate with how much tax they think will be recouped as a result of the information and how much time it will save HMRC’s own investigators. If you are an ex-employee or ex-husband or wife then you will probably get a higher reward as your first-hand information is more valuable. So, to those with an axe to grind, not just the satisfaction of landing someone in trouble – but a cash reward as well. Given the massive rise in payouts, this opportunity is being taken by increasing numbers of people. With one reported payment being for £100,000, you can understand the temptation!
A tax partner at RPC, Adam Craggs, confirms, “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”.
It seems that HMRC is looking to our American cousins for inspiration in how to develop this snitches reward scheme in the future. Mr Craggs said, “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.” Currently in the US, the arrangements enable grasses to earn 30% of the total amount recovered by the IRS because of their information. That includes any recovered tax and the fines for non-payment added together.
This simple equation may make the system easier to administer and will prevent HMRC from getting valuable information for free. It is also government approval of, what feels to many like, underhand behavour. People shouldn’t get away with not paying tax, but does that mean we’re comfortable with paying for more snitching? It’s your taxes that are paying for it…what do you think?
