A record number of tip-offs on alleged fraud were sent to HMRC in the last tax year, as informants reported individuals and firms they believed to be cheating the system.
The taxman received 164,670 anonymous tip-offs of alleged tax offences through its fraud hotline channels in the 2024/25 tax year, a 9% increase on the 2023/24 tax year when 151,763 reports were received.
A combined total of £852,438 was given to informants whose tip-offs provided actionable intelligence on tax fraud, 13% less than was given by HMRC in the previous tax year (£978,256), according to a Freedom of Information (FoI) request by Price Bailey.
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The declining number of rewards paid and the increasing number of tip-offs suggests HMRC is being inundated with more low-value or unverifiable evidence while getting even less valuable information that would merit discretionary payments, the chartered accountancy said.
Furthermore, as more people realise HMRC offers rewards for information about suspected tax fraud, Price Bailey says the taxman is having to contend with growing numbers of speculative, exaggerated, or malicious claims.
The scheme is designed to reward informants who give the taxman actionable information about alleged tax fraud and is one way the government has tried to close the £5.5 billion ‘tax gap’, the difference between the amount of tax owed and the amount of tax actually paid.
Unlike systems elsewhere in the world, like the United States, HMRC does not reward informants with a percentage of the tax collected, but instead offers discretionary, modest payments to informants.
Andrew Park, tax investigations partner at Price Bailey, said “the current reward system lacks both scale and clarity” at a time when the taxman is increasingly depending on taxpayer intelligence.
“If HMRC wants informants to deliver high-value intelligence, it must rethink how it rewards risk and insight. A transparent, percentage-based system – like the one used by the IRS – would offer real incentives for exposing major fraud,” he added.
HMRC is set to shake-up how it rewards tax snoops
While the current reward system currently works to a certain extent, with over 164,000 tip- offs being received, HMRC seems alive to concerns such as those articulated by Park.
In March, a new whistleblower scheme was announced by HMRC as part of its efforts to crack down on tax fraud.
The new regime is more clearly inspired by the one used by the United States’ Internal Revenue Service (IRS) and will reward whistleblowers with a percentage cut of any tax that is recovered, though precise details are yet to be announced.
Park at Price Bailey says the new regime “could be a game-changer, but it must balance the right incentives with selectivity to avoid flooding the system with more noise”.
This is echoed by Kate Ison, partner at BCLP, who says: “The experience of the IRS shows that substantial amounts of money can be recouped by paying informants tax geared sums.
“HMRC’s current scheme has never really offered the right incentives to encourage major whistleblowers to come forward.”
How to report tax fraud to HMRC
If you know or suspect that an organisation or individual is committing tax fraud, the government urges you to report it.
You are able to make a report when you suspect that someone is defrauding HMRC in a number of ways, including:
- Tax avoidance or evasion
- Child Benefit or tax credit fraud
- Hiding or moving assets, cash, or crypto
- Illicit alcohol, tobacco, and road fuel
- Smuggling of precious metals
- Importing or exporting goods without a licence
- Importing or exporting goods that are subject to sanctions
To make a report, you can either use the form on gov.uk’s online portal or contact the HMRC fraud hotline on 0800 788 887.
You will not necessarily be given a reward just for tipping HMRC off to the suspected fraud.
Rewards are only given to informants who provide actionable information that the taxman can use to recover lost tax. Additionally, reward payments are not bound by precise rules and are discretionary.
Park at Price Bailey explains: “HMRC makes payment for tip-offs on a case-by-case basis, determined by discretion rather than a fixed percentage of recovered tax”.
“There's no published formula linking the quality of intelligence to the tax revenue secured, which means whistleblowers can't predict whether their efforts will be rewarded,” he adds.
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