BUSINESS owners have warned there is a risk HMRC’s ‘Strengthened Reward Scheme’, announced in the Budget, could backfire on the Revenue and cost more than it will ever collect.
Though ostensibly targeted at large companies and the ultra-high net worth, they say the size of the bounty on offer could trigger spurious investigations that, cumulatively, will cost more than than the Revenue will ever reclaim as people use it to maliciously target former employers or ex-spouses.
They are also concerned that people or businesses being targeted unnecessarily by speculative claims based on minimum evidence will face “enormous” emotional and reputational damage.
Under the new scheme launched in November’s Budget, which came into force with immediate effect, HMRC has the power to pay informants between 15%-30% of the additional tax collected above the minimum threshold of £1.5m (excluding penalties and interest).
The purpose of the scheme is to see HMRC flooded with credible intelligence that has the potential to deliver significant tax recovery from offshore or avoidance schemes, large companies and wealthy individuals.
However, rewards, HMRC states, are given at its discretion and are not guaranteed. It also says there “could be years between sending the report and receiving any reward payment” given the time complex tax investigations can take.
And it’s this time and its associated cost, says Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, that taxpayers should be worried about.
In theory, Redondo says, the Strengthened Reward Scheme is a no-brainer.
But he adds: “In practice, I fear a lot of time and cost is going to be wasted on a lot of spurious investigations as disgruntled ex-employees, embittered ex-spouses and sacked advisers nursing a grudge dob in their targets via exaggerated, malicious or outright vindictive tip-offs, which HMRC will have to sift through.”
Sam Alsop-Hall, Chief Strategy Officer & Co-Founder at Birmingham-based Clive Henry Group, also believes there is a risk many people and entities could be wrongly accused.
He said: “HMRC’s plan risks turning taxpayers into bounty hunters, and that cannot happen without strong safeguards. Rewards for reporting tax evasion may help uncover wrongdoing among the ultra-wealthy and big corporates, but there is a serious issue being ignored.
“What protections exist for individuals or businesses who could be hit with false or malicious reports?
“We only need to look at the whistleblowing system to see the danger. People can quite literally make things up, drag others through lengthy processes and even into court with little or no evidence.
“The emotional and reputational damage from that sort of behaviour is enormous and, once financial incentives are involved, the risks grow even further.
“HMRC says it reviews information carefully, but the public deserves clarity on how baseless claims are filtered and what support exists for those wrongly accused under the scheme.”
Photo by Dmitrii Ko on Unsplash
