Tax: Contentious: Fraud: An Overview

The most significant development in 2025 related to the government’s widely publicised “crackdown” on non-doms. It had previously been announced that exemptions for individuals who claim non-domicile status would be abolished, and a number of measures were introduced on 6 April 2025, including:

• the removal of the remittance basis regime;
• a move to residence-based taxation whereby UK residents are taxed on worldwide income and gains on the arising basis, subject to new foreign income and gains rules, and various transitional provisions; and
• changes to the IHT exemptions, with the introduction of a residence-based IHT system, with worldwide assets to be taxed at 40%.

Analysts had predicted that these measures could have negative economic ramifications. Various surveys, including by economists, think tanks and tax advisers, had previously estimated that up to 40% of non-domiciled individuals could leave the country within two years of the new regime. The Centre for Economics and Business Research subsequently suggested that the exchequer could lose up to GBP12.2 billion in tax within half a decade if 50% of non-doms were to leave the country. In addition, the changes to IHT rules mean that UK taxpayers are now able to avoid IHT entirely within ten years of emigration. There is therefore also a concern that wealthy British taxpayers may expatriate as well.

The initial signs suggest that the fears of a mass exodus may have been overstated. HMRC’s own data appears to demonstrate that the number of non-doms to leave the UK are in fact lower than forecasted. Whilst there is some contention as to whether any trends can be drawn in relation to the figures, there has nonetheless been a perceptible softening of some aspects of the government’s original proposals. For instance, there have been amendments to the transitional provisions, which will allow non-doms to bring in previously earned income and gains at lower fixed rates up to the end of 2028. More significantly, there are reports that the government may be reconsidering the imposition of a 40% inheritance tax on global assets. It remains to be seen whether any backtracking will be significant.

The government had initially predicted that the non-dom changes would raise an additional GBP33 billion in tax over five years. That estimate now appears to be over-optimistic, and there are credible arguments that the reform could in fact be fiscally negative. In the meantime, therefore, additional measures will be required to close the tax gap, which has widened in absolute terms in recent years. There is speculation that the upcoming budget will see stamp duty reform, with the introduction of a national property tax, also known as the mansion tax. Under the proposals, homeowners selling their principal residence would lose private residence relief and pay CGT at up to 24%.

There will also be an increased focus on tax investigations into the wealthy. HMRC’s Wealthy and Mid-Sized Business Compliance team brought in GBP1.5 billion in 2023-24, which was more than double the amount that was raised in the previous year. However, at the same time, HMRC investigations into serious fraud reached a six-year low, which is a disparity that HMRC will want to address. Given the increased intelligence-gathering powers now at HMRC’s disposal, it is likely that compliance activity will increase in the coming years.

After seven years of waiting, that increase may well include a focus on prosecuting corporates for failure to prevent the facilitation of tax evasion. In 2024, there were 11 ongoing investigations into companies, with 28 more under review. However, most significantly, in August 2025 the first ever prosecution under the Criminal Finances Act 2017 was brought, with a company being charged under Section 45 for failure to prevent fraudulent R&D tax credit claims. A trial is due to take place at the end of September 2027. It is possible that this development may be the catalyst for a more robust approach towards corporate enforcement, at the same time as new failure to prevent fraud offences and expanded corporate liability under the Economic Crime and Transparency Act 2023 come into force.

However, perhaps the biggest change on the horizon relates to the proposed reforms to the incentivisation of tax whistle-blowers. Section 26 of the Revenue and Customs Act 2005 already provides for discretionary rewards, but payments to informants have increased steadily over the last decade, with more than GBP5 million paid by UK tax authorities to whistle-blowers since 2013/14. By way of comparison, US tax authorities paid out USD88.8 million (GBP72,469,986) during the 2022/23 financial year alone. In the 2025 Spring Statement, the Chancellor announced that HMRC would be launching a new reward scheme in 2025 “targeting serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes… [taking] inspiration from the successful US and Canadian models, rewarding informants with compensation linked to a percentage of any tax taken as a result of their actions.”

Whilst the US model has proven successful in recovering lost tax revenues, serious questions arise as to whether the use of paid whistle-blowers is likely to result in perverse and unfair outcomes. By providing a financial motivation for individuals to come forward as whistle-blowers that is proportional to the quantum of recovery, there exists a real risk of exaggerated claims, compromised ethics and selective disclosure. However, given the shortfall in public finances, said to be GBP40 billion, it is likely that HMRC will utilise every resource at their disposal in order to plug that fiscal gap. Practitioners will need to be on their guard in order to ensure that HMRC uses its powers appropriately and responsibly.