Tax informers

The taxman is increasingly relying on informers as part of the department’s drive to increase tax revenue, a Freedom of Information Act request has revealed.

The request, made by City law firm Reynolds Porter Chamberlain LLP (RPC) showed that HMRC paid out £373,780 to informers last year (to April 5th 2012), an increase of 21% on the previous year when it only paid out £309,620.

HMRC are under intense pressure from the Treasury to increase the tax yield for the Exchequer and they are increasingly resorting to unorthodox methods to get the job done, such as paying informers for tips that may lead to the opening of enquiries into the tax affairs of the individuals concerned,’ said RPC tax partner Adam Craggs.

RPC says that HMRC’s High Net Worth unit, which targets individuals with wealth exceeding £20m, and its Affluence unit, which targets individuals with a net worth of at least £1m, may pay informers for information on those individuals who they suspect of having not complied fully with their tax obligations.

‘HMRC’s focus on high net worth and wealthy individuals means that they are turning to paid informants for evidence of undeclared income,’ said Craggs.

‘Typically, an HMRC informant will be an angry spouse during divorce proceedings. For the spouse, threatening to supply information to HMRC provides them with some leverage during divorce settlement negotiations. If the divorce is particularly acrimonious, it is not uncommon for a spouse to turn HMRC informant,’ he said.

He added that while the sums of money HMRC are paying to informants may not be huge, the payments are increasing and the whole process is shrouded in mystery.

‘HMRC doesn’t make it clear why it might make a payment, when it might make a payment, or to whom it might make a payment.

‘This lack of transparency is very worrying. Are uniform criteria being applied consistently when HMRC make these payments to informers? It’s impossible to tell at the moment. If HMRC are going to make payments to informants there needs to be a robust system in place with appropriate checks and balances. HMRC should be properly accountable when using taxpayers’ money for payments of this nature,’ he said.