What the 'whistleblower' reward scheme means for tax compliance

The government has recently announced that a new reward scheme will be established later this year to encourage informants to report tax fraud to HMRC.

What such a reward scheme means for tax compliance is considered in this blog which is based on an article written by Adam Craggs that was published in FT Advisor on 17 July 2025.

Background

Given the current economic climate and the government's drive to find more cash, reducing the tax gap, which is currently £46.8bn, is an obvious target, and incentivising individuals to report non-compliance wish financial rewards is an approach that has been successfully deployed in other jurisdictions.   Against this backdrop, it is perhaps not surprising that the government has recently announced that a new reward scheme will be established later this year to encourage informants to report tax fraud to HMRC.  

HMRC currently offers discretionary rewards to informants, but publicly available information on the criteria used to determine eligibility and calculate payments is limited. However, available data suggests that total payments of around £1m were made in the 2023/24 tax year. This is a relatively modest sum when contrasted with the US and Canadian schemes, which are significantly more generous and underpinned by clearly defined eligibility criteria and transparent operational policies. 

The US and Canadian schemes offer fixed-percentage rewards based on the amount of additional tax recovered as a result of information provided by the whistleblower. As a result, the financial incentives can be substantial. For example, in 2024, three US whistleblowers shared an award of $74m after their disclosures led to the recovery of $263m in unpaid tax. Whether the new UK scheme will be as generous remains to be seen, but the government has confirmed that rewards will be “significant”.       

While the proposed scheme promises to enhance compliance, such a scheme also introduces serious new risks for corporates and wealthy individuals, who may see a sharp uptick in HMRC scrutiny triggered by both external sources and insiders 'tipping-off' HMRC.

Whistleblowing policies

Even legitimate tax planning might be identified by would-be whistleblowers, diverting significant time and resources to managing HMRC investigations and responding to compliance checks.

To mitigate such risks, corporates and wealthy individuals will need to carefully consider their historical and future tax compliance, and ensure that they have robust policies and procedures in place to ensure that they comply with their tax obligations and, importantly, limit any public perception of non-compliance.

Tax planning, offshore structures and cross-border transactions may require particular attention given their complexity and the fact that they have become priority areas for HMRC scrutiny in recent years.

Taxpayers should ensure that their tax affairs in these areas are underpinned by robust professional advice and comprehensive contemporaneous documentation that evidences the commercial rationale for any transaction, or arrangement.

Careful consideration should also be given to disclosure strategies, recognising that HMRC may take a more lenient approach where a potential tax risk has been identified and voluntarily disclosed to HMRC. 

Finally, corporates should ensure that robust whistleblowing policies are in place and are fully up to date with all applicable legislation. Such policies should provide clear and confidential channels for staff to raise genuine concerns. They should also make explicit that such concerns will be taken seriously by senior leadership, with transparent processes for further investigation and resolution.

Fostering a culture in which issues are addressed internally rather than escalated directly to HMRC will be critical in managing reputational, financial, and regulatory risk.

Given the volume of sensitive information shared with external third-party advisers, it is equally important to understand the whistleblowing policies those firms have in place, to ensure their staff are also encouraged to report concerns they may have through a rigorous internal process.

While it may not be possible to prevent individuals from making a disclosure to HMRC, especially when a substantial financial reward is on offer, a well-designed whistleblowing policy should encourage individuals in the first instance to raise any concerns they may have internally  rather than contact HMRC directly. Such a policy will also demonstrate that the organisation takes its tax compliance obligations seriously.

The tax affairs of corporates and wealthy individuals are already subject to unprecedented levels of scrutiny by HMRC, which demand the commitment of substantial time and resources, and the introduction of the new whistleblower scheme is likely to result in increased scrutiny from HMRC. Staying informed, understanding the implications for complex tax transactions/arrangements, and taking proactive steps to mitigate risk, are more important than ever.