By Katie McKreath, Solicitor Advocate, KMC Legal & Finance
HMRC is making a significant change to how it deals with serious tax non-compliance.
A few months ago, in a speech marking HMRC’s 20th anniversary, Treasury Minister James Murray MP confirmed that a new whistleblower reward scheme will be introduced later this year. It’s designed to encourage insiders to report serious tax wrongdoing, particularly involving large companies, wealthy individuals, offshore arrangements, and avoidance schemes.
This isn’t just a new process. It’s a cultural shift.
For the first time in the UK, whistleblowers could receive a share of the tax recovered as a result of their report. This approach is already well established in the United States and Canada, and all signs suggest HMRC is planning something similar here.
So, what’s different?
At the moment, HMRC can reward informants using its existing powers under the Commissioners for Revenue and Customs Act 2005. But those rewards are discretionary, often quite small, and not tied to outcomes. There’s no fixed formula, and no real incentive for someone to come forward with high-value, high-risk information.
That looks set to change. HMRC now seems to be moving toward a system that offers much more meaningful rewards.
If it follows the approach used by the IRS in the US, whistleblowers could receive between 15 and 30 per cent of the tax recovered.
The final amount would likely depend on how much is recovered and how serious the case is.
This new scheme would sit alongside HMRC’s existing powers, rather than replacing them. But the difference is in the details.
In practice, this means that individuals with credible, inside knowledge of deliberate tax wrongdoing could now be financially rewarded for helping to recover lost revenue.
How do schemes like this work overseas?
The IRS has a dedicated Whistleblower Office. Anyone wanting to report serious tax fraud or avoidance must complete a formal claim, which includes:
- A clear explanation of the issue
- Supporting documents or evidence, or a description of what exists and where it might be
- How do they know this information, and what is their connection to the taxpayer
The form has to be signed under penalty of perjury. If the report is accepted, it’s reviewed and passed to the relevant enforcement team. If the case leads to recovered funds, the whistleblower can be paid a share.
Notably, anyone directly involved in the wrongdoing, for example, a director who set up or benefited from the scheme, is unlikely to qualify. That would also apply under UK law, where a director can already be held personally liable for deliberate tax errors.
What counts as serious non-compliance?
This hasn’t been clearly defined, but it’s expected to go beyond obvious criminal evasion. The inclusion of avoidance schemes in the government’s announcement suggests that civil cases may also qualify, particularly where there’s evidence of deliberate behaviour, negligence, or failure to take advice.
It’s not about small mistakes or late filings. This scheme is aimed at significant breaches where there’s a clear intent to underpay tax.
Is there a risk of false or malicious claims?
Absolutely. When money is involved, there’s always a risk of abuse. In the US, there have been cases where individuals submitted hundreds of claims in bad faith, and some were eventually banned from whistleblower programmes.
That’s why any UK system must be well-resourced and well-managed. A properly staffed whistleblower team, clear evidence thresholds, and strict eligibility criteria will be essential to protect the integrity of the process.
What should businesses do now?
Even though the scheme hasn’t formally launched, businesses need to prepare. HMRC is under no obligation to tell you why they’re opening an enquiry. A whistleblower report could trigger a compliance check, and you may never know it was the cause.
If a current or former employee makes a protected disclosure and is then treated unfairly, that could open the door to a tribunal claim. Whistleblower protections under UK employment law are strong and rightly so.
There’s also a reputational angle to this. A whistleblower could go public before HMRC does anything, especially if they’re trying to put pressure on a business. Once a report is filed, nothing is stopping them from contacting the press or speaking out on social media. If that happens, how your business responds will matter legally and publicly.
How can we help at KMC Legal & Finance?
We advise both individuals and organisations on the legal implications of whistleblower schemes.
If you’re considering reporting serious tax wrongdoing, we’ll talk you through the process, your legal protections, and whether you might qualify for a reward under the new scheme.
If you run a business and want to get ahead of these changes, we can review your internal reporting policies, help you handle a disclosure correctly, and support you if a report triggers an investigation.
This scheme is still developing, but the direction of travel is clear. The UK is stepping into new territory, and we’re ready to guide you through it.
To speak with our team in confidence, call 0800 9494 667 or email defence@kmclegal.co.uk.
