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HMRC ‘tax snitching’ rewards reach £1m during financial crisis

Pay-outs for informing on tax evasion rise in latest financial year, new figures show

I would not like to see this turned into a career

Stephen Camm, tax partner, PwC

More than £1 million has been paid out in rewards for informing on tax evasion in the UK during the financial crisis, Exaro can reveal.

HM Revenue & Customs (HMRC) is handing out hundreds of thousands of pounds a year in the little-known bounty payments amid growing public concern about tax evasion.

The rewards to members of the public rose by more than a fifth, to £374,000 in 2011-12 compared with the previous financial year, figures released to Exaro by HMRC under the Freedom of Information Act show.

HMRC has paid just over £1m in the last three financial years, since the global financial crisis struck in earnest with the collapse of Lehman Brothers, the Wall Street bank, in 2008.

Hundreds of people a year have received rewards ranging from about £50 to thousands of pounds, depending on how much tax is recouped as a result of the information provided.

The total of £373,780 paid out by HMRC in the past year compares with £309,620 in 2010-11, £384,110 in 2009-10, £281,000 in 2008-09, and £155,950 in 2007-08.

An HMRC spokesman described the annual totals as “lumpy”, with a few big rewards in a year able to skew the figures.

In 2008, HMRC was reported to have paid £100,000 to a former Liechtenstein banker for a list of secret offshore accounts held by Britons.

The HMRC spokesman said: “If we are recovering many millions of pounds in tax, the payment reflects that.”

The increase in reward payments over recent years may reflect growing disquiet about tax evasion in ‘austerity’ Britain. “Tax non-compliance now has a much higher profile in the public mind,” the spokesman pointed out.

John Whiting, director of tax policy at the Chartered Institute of Taxation, said: “While many people do not realise that they can get money [for informing], the Revenue does have the power to pay.”

Stephen Camm, tax partner at PwC, the accountancy giant, suggested that the increase in the top rate of income tax to 50 per cent in 2010 could be a factor in the rising payouts. “When tax rates go up, there is more evasion,” he said.

HMRC does not openly promote the bounty payments, with some front-line officials even denying that rewards are paid.

Accountants advise that anyone wanting payment for informing should ensure that a record is made of their request.

The HMRC spokesman said that the cash is only handed out once any tax is recovered, a process that can take years.

Payments are at HMRC’s discretion, said the spokesman. The rewards depend on “the value of the information and the quality of the result”, he added, although they are not a fixed per-centage of the tax recouped.

He said, however: “We would expect individuals to think first about the wrongdoing rather than about how much they might make.”

Tax experts said that, while modest rewards were useful for giving an incentive to informers, paying substantial sums could create a more questionable “bounty-hunter” culture.

“I would not like to see this turned into a career,” said Camm.

Typical HMRC informers include ex-business partners, former spouses and employees, as well as people reporting “someone bragging in the pub” and “warring neighbours”, according to the HMRC spokesman.

An informer’s identity is generally kept confidential, although it may have to be disclosed in certain legal proceedings.

HMRC’s dedicated tax-evasion hotline, 0800 788887, which also has an online reporting facility, is the main route for reporting tax dodging. Some individuals also post information to tax offices.

The hotline received nearly 74,000 calls and other contacts in the past year, down from a recent high of nearly 81,000 in 2009/10.

A total of £42 million of unpaid tax was recovered between 2005 and 2009 as a result of information received from members of the public, according to HMRC.

It declined to provide figures for the amount of tax recouped more recently.

HMRC figures show that the total paid out to informers in the late 1990’s was substantially higher – at more than £1m a year – but these included rewards for tip-offs about smuggling of cigarettes and drugs. The UK Border Agency has since been given responsibility for smuggling investigations.

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