HMRC pay individuals for information that leads to the recovery of unpaid tax. It is within their scope under the Commissioners for Revenue and Customs Act 2005. This has cost the country £2.23 million in the last five years.

Given the high stakes involved, this has to be be done with some degree of secrecy. For example, HMRC does not have to include the amount they spend on tax tip-offs within their annual accounts, as it is not “a key performance metric”.

How do we know about these HMRC payments to informants?

There is a body called the National Audit Office (NAO) that monitors how government uses public funds. Its Head, Aymus Morse, is responsible for publicising this part of HMRC’s spending.

The amount of pay-outs made to individuals for information about unpaid tax in the last five years are:

  • 2017-18: £343,500
  • 2016-17: £421,460
  • 2015-16: £460,433
  • 2014-15: £604,800
  • 2013-14: £402,160

Is there a maximum limit on the amount paid to an individual?

Yes, the absolute maximum HMRC can pay an individual is £250,000. This would have to be signed off by a director of intelligence. The other increments are: £5,000, £10,000 and £100,000. All of these requiring an increasingly senior member of staff to authorise the payment.

The amount you are paid depends on the impact that your information has. The more tax recouped, the higher your reward.

The maximum sum is only issued for “mother-lode material…It would have to be enough to close down a company, or something.”, according to a Times HMRC source.

All payouts are tax free and an official spokesperson said the “vast majority” of tips did not receive any payment at all.

What is the problem with this system?

If the information leads HMRC to recover unpaid tax, then surely it’s a price worth paying? This is one of the problems with the current scheme. A direct correlation between paid for information and tax collected cannot be made.

Another issue is the transparency of the system. It is difficult to see the details with clarity. Adam Craggs, a former HMRC employee told The Times: “You would get a disillusioned spouse who said that they were upset with their husband and would give details to HMRC. They knew where the bodies were buried, as it were. It is not a transparent process and it is, to a certain extent, open to abuse for those with vested interests. Public money is being paid to informers — your money and my money.”

Those informing on an ex-business partner, or divorced spouse or civil partner have their own motives. They are using their information to hurt another individual while making a bit of money for themselves. Obviously, HMRC are fully aware of this and don’t just take people on their word, but carry out full investigations.

Accounting for this spending of taxpayers’ money is another issue. It is all documented and clearly the NAO have things carefully monitored. But do we get back more than we pay out?