HMRC paid £400k for information relating to tax fraud in past year

International law firm RPC said it is likely that a proportion of the money paid to informants would have been for information relating to abuse of COVID support schemes, including the furlough scheme.

HMRC estimates in their annual report and accounts for 2020 to 2021 that £5.2 billion of the money it paid out as part of the furlough scheme ended up in the hands of organised criminals, fraudsters or was paid out erroneously.  
 
Extreme cases include a self-styled “entrepreneur” who is currently awaiting criminal trial for furlough fraud after reportedly claiming £26.5 million on behalf of non-existent employees at four “virtual” companies.
 
The dedicated hotline set up by HMRC to enable people to report suspected abuse of the furlough scheme has so far received more than 28,000 reports.
 
The RPC report found that the size of payment to an informant is decided on a case-by-case basis, however, it is often based on the amount of money HMRC expects to recover as a result of the information. Many investigations into furlough fraud will have been triggered by information provided by disgruntled employees (or former employees). Such employees may be seeking to punish bosses who they feel have wronged them.
 
RPC said that the recent “Pandora Papers” leak of almost 12 million documents relating to the affairs of a large number of individuals, including world leaders, HNWs and celebrities, demonstrates just how valuable information from external sources can be to tax authorities such as HMRC.
 
Adam Craggs, partner and head of tax, regulatory and financial crime said HMRC is fully engaged in clamping down hard on tax evasion and will use any information that can help it catch tax evaders and those who assist in such criminal activity. Paying informers for helpful information is part of that process.

“HMRC is under pressure from the Government to increase the tax yield. With increased public spending during the pandemic, recovering unpaid tax will be a high priority for the Treasury as it seeks to increase Government revenue,” he said.

Michelle Sloane, partner at RPC, added the financial reward available for providing data to HMRC may attract more informants to contact HMRC.

“Those with personal knowledge of a company’s or individual’s illicit financial or tax arrangements may be motivated to come forward if they think they will receive a financial reward,” she said.