The UK’s New Whistleblower Era: What the 2025 Budget Means for Compliance

Voiceover (00:01):
Welcome to An Ounce of Prevention, a podcast from Skadden’s White Collar Defense and Investigations group that explores critical issues shaping the landscape of corporate compliance and enforcement around the globe. Join us for in-depth analysis and practical insights to help you navigate the complexities of corporate accountability.

Andrew Good (00:24):
Hello, and welcome to the fourth episode of Ounce of Prevention, a podcast series presented by the white collar defense and investigations team at Skadden. This podcast brings you regular analysis of key compliance and white collar crime trends, important industry news and developments, as well as insights from the leading practitioners in the field.

(00:44):
My name is Andrew Good and I’m a partner in Skadden’s London team. I specialize in representing clients in complex governmental and regulatory investigations into alleged corruption and misconduct. I look at things like bribery, fraud, money laundering, and insider trading. The topic of today’s podcast will be the financial crime implications arising from the UK government’s 26th November 2025 budget. To help walk through what the budget means for companies and practitioners, I’m joined today by my colleagues, Patrick O’Gara and Vanessa McGoldrick.

(01:21):
Patrick leads the Tax Controversy group in our London office, including international tax planning and dispute resolution matters. Vanessa is back joining us again and is a council in the White Collar Defense and Investigations team here in London. And she advises clients on a broad range of cross-border regulatory, criminal, civil investigations, and financial crime matters. Patrick and Vanessa, welcome to the Ounce of Prevention Podcast.

Patrick O’Gara (01:49):
Thanks, Andrew. I’m delighted to join you.

Vanessa McGoldrick (01:51):
Thanks, Andrew. Great to be back.

Andrew Good (01:52):
Great. Well, let’s get into it. From a tax perspective, there’s obviously a great deal to unpack coming out of the UK budget, but today let’s focus on what’s probably the headline point on the budget from an investigations perspective. And that’s HMRC’s new whistleblower incentive scheme.

(02:10):
Patrick, can you walk us through the scheme, what it’s changed, and why that’s a significant development for practitioners and companies?

Patrick O’Gara (02:18):
Absolutely. So HMRC has taken a major step by announcing the introduction of a US style whistleblower incentive scheme in the government’s budget last week. This is a real evolution in HMRC’s approach to UK tax enforcement in the context of serious tax avoidance innovation. Under the new strengthened reward scheme, individuals who provide original information to HMRC that leads to the recovery of at least 1.5 million pounds in tax can receive a reward of between 15% to 30% of the tax actually recovered by HMRC. This is a substantial increase from the previous much more limited discretionary payments that HMRC could make, but very rarely did in the past.

Andrew Good (02:57):
That’s interesting, the monetizing of that incentive. Very interesting.

(03:01):
And Vanessa, can you talk to us a little bit about who would be eligible to receive a reward under the new scheme?

Vanessa McGoldrick (03:07):
Sure. So the UK has set an eligibility criteria to prevent abuse of the scheme, so certain things are not going to be covered under the scheme. For example, the information’s already been provided to HMRC or it could have been identified through routine processes. And anonymous reports also will not be covered by the scheme. We do anticipate though, Andrew, that there’s going to be some additional guidance on the scheme, and that will really help determine just how effective this new program’s going to be and how it will work.

Andrew Good (03:33):
Interesting.

(03:34):
Patrick, the scheme, I guess, is being introduced as sort of a change or growth around a scheme that previously exists under the HMRC remit. Why do you think this new scheme is being introduced?

Patrick O’Gara (03:47):
Well, I think the policy aim here is very clear. This is designed to encourage people to come forward with information about high value tax avoidance and evasion. And it’s part of a broader push by the UK government to close the UK’s tax gap, which HMRC estimates at nearly 47 billion pounds for the last tax year. And that’s been a very consistent tax gap that has been measuring for several years now. HMRC’s this scheme is targeted at large companies, wealthy individuals, and offshore or avoidance schemes, areas that it sees as particular risks to the UK tax base. As I think we’ll come back to discuss later on in the podcast, this shift for HMRC is against a backdrop of other UK authorities considering incentive schemes for whistleblowers.

Andrew Good (04:31):

Having come across here a couple of years ago, I can see it’s a big shift to start monetizing incentives like this. And it’s interesting to see the UK taking perhaps some inspiration from similar schemes in the US.

Patrick O’Gara (04:44):
Yeah, it is. So how does the UK’s new scheme compare to the various US whistleblower programs that you’re familiar with?

Andrew Good (04:50):
Yeah, absolutely. So the US has been providing financial incentives for whistleblowers for quite a while. Several US enforcement authorities run their own programs. The US Tax Authority, the IRS, had a formal whistleblower office since 2006, and it offers mandatory rewards of 15% to 30% of tax collected, provided the recovery exceeds $2 million. In the last fiscal year alone, based on reporting from the IRS, it paid out over $120 million to whistleblowers. And we know that the HMRC has actively engaged with the IRS in developing its proposed structure.

(05:27):
Other US agencies like the CFTC and the SEC also offer rewards. Again, these are typically between 10% and 30% of the money that ultimately is collected in successful enforcement actions that result in sanctions that exceed a million dollars. The US anti-money laundering enforcer, FinCEN, also now has a program that was initiated based on legislation in 2020 that seeks referrals related to money laundering and economic sanctions violations.

(05:59):
The programs in the US have been around for quite a while and they have been successful if you’re measuring success in terms of the economic value of incentive payments. For example, the SECs paid out over two billion in rewards, it’s US dollars, and the CFTC over 390 million. So they’re clearly getting reports in the door, and those reports are clearly leading to the imposition of penalties and fines.

Vanessa McGoldrick (06:22):
That’s really interesting, Andrew. And what about the US Department of Justice? Do they have programs for whistleblowers? Is this in development over there with the DOJ?

Andrew Good (06:31):
Yeah, and the DOJ is working on its own pilot program. It introduced that just over a year ago. And that program was really designed to fill some of the gaps that were left around other government whistleblower incentive programs. And this really covers a broad range of corporate wrongdoing. The program would pay whistleblowers based outside of the US. Although the program is still new, the DOJ clearly anticipates receiving quality information coming out of that program. The department hasn’t released any official statistics yet on the payouts, but Assistant Attorney General Matt Galeotti has said that the program is working and is a source of robust tips for the criminal division of the Department of Justice.

(07:11):
Just this past December, he shared that within the last four months, they had received over 300 tips through the program and that they had determined that 120 of those 300 were deemed to warrant further investigation. So it does appear that it’s a promising and effective mechanism for the government to gain tips to use to initiate investigations.

Vanessa McGoldrick (07:34):
I can certainly understand why the UK’s decided to adopt a similar structure to the IRS. Although as I understand it, the HMRC scheme does have some notable differences compared to the IRS. Patrick, perhaps you could run us through what those differences are.

Patrick O’Gara (07:47):
Yeah, thanks, Vanessa. I think the key difference is that the HMRC award scheme is discretionary. So HMRC decides whether and how much to pay, whereas the IRS is required to pay whistleblowers who meet certain criteria. I think we’re hoping to see some guidance from HMRC on how it’s going to operate this scheme in practice, so that’s something to keep an eye on.

Andrew Good (08:06):
Yeah, I think that additional guidance will be really helpful as we look at it.

(08:10):
And Vanessa, do you think we’re going to see other UK regulators and enforcement authorities following HMRC and looking to financially incentivize whistleblowers?

Vanessa McGoldrick (08:22):
I do, Andrew. I mean, paying whistleblowers is a newer practice in the UK compared to the US, but for example, the Competition and Market Authority, the CMA, has offered rewards related to unlawful cartel activity in the past, recently upped the amount and level of their reward from 100,000 pounds to 250,000 pounds in 2023. And that increase in payment amount came after there had been a sharp decline in the number of calls into the CMA’s tip line after COVID. And so it was a renewed attempt to further incentivize would be whistleblowers to come forward.

(08:53):
With respect to the UK Financial Conduct Authority, the FCA, they have recognized the benefits that can come from receiving quality information from whistleblowers and are also considering their own scheme. This is something that they’ve been considering over many years, over a decade ago. Their consultation on the issue, they decided not to move forward, but it’s something that’s back on their agenda now.

(09:14):
And then with respect to the UK Serious Fraud Office, the SFO, they have explicitly listed progressing whistleblower incentivization reform as a key priority for the upcoming year for them. So I think my takeaway is, new award programs will be coming in the UK. It’s just a matter of time.

Andrew Good (09:29):
And as those new programs come in and this program is implemented, it certainly appears likely to have an impact on corporations operating here.

(09:38):
Patrick, what should businesses be thinking about in light of this new incentive scheme?

Patrick O’Gara (09:42):
Well, I think it might take a little bit of time for the full impact of this development to unfold, but really this should be taken as a wake-up call for companies, especially those with significant potential UK tax exposures. With the financial incentives now on offer, I think we can expect an uptick in whistleblowing and not just in reports to HMRC. Companies should be prepared for an increase in internal whistleblower reports as well. I think in that context, companies should be reviewing their whistleblowing policies to ensure that they have effective internal reporting channels and protection so that employees can feel comfortable raising any concerns that they might have internally rather than first going to the authorities.

Andrew Good (10:18):
Yeah, absolutely. I think that cultural piece is really critical. It is important for companies to have systems set up where their employees feel comfortable raising concerns internally. The last thing you want is to be finding out about a problem through HMRC as opposed to getting a chance to analyze it and deal with it yourself.

(10:36):
Vanessa, what other things should companies be considering from a compliance perspective?

Vanessa McGoldrick (10:40):
I think it’s also going to be important to make sure companies have got clear protocols for handling disclosures, robust internal investigation procedures, and up-to-date dawn raid policies and trainings to employees so everyone is prepared in the event of unannounced inspections by authorities, including HMRC.

(10:58):
Other things to think about are the employment terms should be reviewed to ensure that they’re not, don’t improperly restrict lawful disclosures of confidential information by whistleblowers, and companies should clarify the tax treatment of any settlements where tax liabilities might arise. I think the bottom line is that companies need to really foster a culture of transparency and compliance. And as Patrick noted before, really be prepared for increased scrutiny from both employees and HMRC.

Andrew Good (11:22):
And I guess to turn to other financial crime measures that are in the new budget, one that raised my eye is the proposed consultation on potential new recklessness criminal offense for direct taxes.

(11:36):
Vanessa, what’s the government proposing on that?

Vanessa McGoldrick (11:38):
So the government’s plans to publish a consultation in early 2026 on the introduction of this new criminal offense of recklessness in relation to a fraudulent evasion of direct taxes, and this would bring the treatment of direct taxes in line with existing offenses for indirect taxes like VAT. And the idea really is to make it easier to prosecute individuals who act recklessly, turn a blind eye to obvious risks or fail to take reasonable steps to prevent tax evasion. And this lowers the threshold from deliberate dishonesty closer to a kind of gross negligence, and it could potentially increase the number of cases where criminal charges could be brought.

(12:14):
And again, this feeds into the need for companies and senior management to really understand and have a greater emphasis on robust tax governance, risk management, steps that are needed, and to be able to demonstrate that they’ve taken reasonable steps to prevent tax evasions through their organization. And that’s increased by increasing training, better controls, and oversight more generally.

Andrew Good (12:34):
And then there’s another part of the budget that’s discussing rogue directors. What’s happening with respect to that?

Vanessa McGoldrick (12:41):
So another development, so the UK government is investing 25 million pounds over the next five years to recruit more staff for the Insolvency Service, with the aim of disqualifying more rogue directors. And the budgeted money will fund a new task force with resources that aimed at investigating suspicious company insolvencies. And the aim really here is to identify directors who deliberately liquidate companies to write off their debts and evade tax. And there will also be amendments to the Company Directors Disqualification Act of 1986 to extend the circumstances in which directors can be disqualified when they’ve broken the law. And this is intended to be legislated for in a future finance bill.

Andrew Good (13:20):
Interesting. So we’ll keep an eye out for that as those are coming through.

(13:22):
Patrick and Vanessa, as we conclude today, what would you say the key takeaways are for companies as they’re digesting the investigations impact of the new budget?

Patrick O’Gara (13:31):
Yeah, I think the new whistleblower scheme is just another initiative supporting the broader government focus on closing the UK tax gap. However, that is arising. Other initiatives include greater resources for HMRC compliance teams, registration of tax advisors and tightening of disclosure rules around tax avoidance schemes, broadening of uncertain tax treatment disclosure rules to HMRC, and buttressing the tax advisor conduct standards in the market.

Vanessa McGoldrick (13:58):
And from my perspective, I think that the scheme means that there is going to be a likely increase in the number of inquiries and investigations being conducted by HMRC. So this really just means that companies should be refreshing their compliance policies so they’re well positioned in the event they receive a regulatory outreach and also can handle any internal reports that they might receive.

Andrew Good (14:17):
Well, thanks both for joining today. There’s certainly a lot for listeners to think about as we watch this new program roll out and some of the new anticipated legislation as well. Thanks all for tuning into this episode of the Ounce of Prevention. We’ll be back soon with more insights on the evolving landscape of financial crime and compliance. Until then, goodbye.

Voiceover (14:42):
Thank you for joining us for today’s episode of An Ounce of Prevention. If you like what you’re hearing, be sure to subscribe in your favorite podcast app so you don’t miss any future conversations. Additional information about Skadden can be found at skadden.com.