HMRC to adopt new US-style tax snoop scheme to tackle tax evasion

March 16, 2025

Tax Minister, Jame Murray, will unveil a new scheme to incentivise informants to come forward to HMRC with information on tax dodgers. The new scheme will offer significantly higher rewards than the current scheme, bringing HMRC in line with the substantial payouts to tax informers offered by the Internal Revenue Service (IRS) in the US.

As part of the announcement, the minister will set out what HMRC is doing to tackle Phoenixism (where individuals or groups deliberately wind up a company to avoid paying taxes or debts).

The announcement can be found here: https://www.gov.uk/government/news/boost-for-side-hustlers-as-300000-people-to-be-taken-out-of-tax-returns-government-announces

Commenting on the new IRS-style tax whistleblowing regime, Kate Ison, Partner at BCLP, the international law firm, said:

“The experience of the IRS shows that substantial amounts of money can be recouped by paying informants tax geared sums. HMRC’s previous scheme never really offered the right incentives to encourage major whistleblowers to come forward. The measures announced today go some way to address that.”

“HMRC receives a lot of low-level reports by feuding neighbours and disgruntled employees. Big ticket tax fraud is often highly complex and may involve criminal gangs where there is a risk of physical harm. There need to be serious incentives to encourage whistleblowers to come forward in such cases as well as appropriate legal safeguards.”

Ison went on to also share her thoughts on Phoenixism as follows:

“Phoenixism accounted for approximately £500 million of HMRC’s tax debt losses in 2022/23. Despite efforts to combat the problem, including the Targeted Anti-Avoidance Rule in 2016, it has remained intractable. The reality is that whatever new powers agencies have to tackle phoenixism will count for very little unless existing powers are used more widely. For example, under 100 directors were disqualified last year under Section 6 of the Company Directors Disqualification Act 1986, which is lower than it was a decade ago.”