HMRC pays out £350,000 to tax evasion ‘snitches’ in a year

Tens of thousands of people informed the authorities about those they suspected of evading tax last year, Telegraph Money can disclose.

Figures released in response to a Freedom of Information request show that 40,695 people called HM Revenue & Customs’ tax evasion hotline in 2017-18, more than double the previous year’s 20,200 reports.

Financial rewards are on offer for those who report suspicious activity and the taxman paid out £343,500 to informants last year.

HMRC said it was unable to provide a precise figure for how much tax was recovered as a direct result of calls to the hotline, as these reports were often not “stand-alone”. It said £30.3bn was recovered last year through its wider work to stop error, avoidance and evasion.

Industry experts said the type of activity involved could range in scale from the use of sophisticated offshore structures to avoid paying millions in British tax to the gardener who gets paid cash in hand and fails to declare income to the Revenue.

The Exchequer lost £14bn to deliberate non-compliance last year. HMRC figures show that tax evasion and the cash-in-hand, or hidden, economy accounted for £8.5bn of this.

Fiona Fernie of Blick Rothenberg, the accountants, said: “There will be a huge mixture of things. You will get the people reporting VAT fraud on art, the local builder who is getting paid cash in hand, or the structures offshore where people are hiding their money.

“Then there will probably be vindictive people who just think their next-door neighbour has a bit too much money.”

She added: “HMRC has always encouraged people to report their own tax irregularities. It will always listen to anyone who will help and it will reward them.

“In the past it has used a carrot to encourage people to come forward. The days of the carrot are over, now it’s using a whopping great stick.”

There was a sharp decline in calls in 2015-16. George Bull of RSM, another accountancy firm, said this could be down to the merging of two separate hotlines that year, one for tax evasion and one for customs fraud.

He added: “It’s tempting to believe that the publicity surrounding the launch of the new hotline will have boosted the public response. Nevertheless, the decline in the number of reports made was surprising in view of the level of public concerns surrounding tax evasion.”

Penny Ciniewicz, HMRC’s director general for customer compliance, said: “Intelligence we receive from the public makes an important contribution to our work to close the tax gap and fund our vital public services. Anyone who has information can search ‘report a fraud’ on gov.uk to find our dedicated hotline number, online form and postal address.”