Artificial Intelligence is everywhere. In the Euros, the linesman’s flag is (frustratingly!) overtaken by ‘VAR’. In the UK election, Labour has made manifesto commitments to boost HMRC tax investigations with AI. With all the focus on automation and data, it is easy to forget that most football decisions are still made by referees, most tax investigations decided upon by real people.

HMRC gets many of its significant investigation leads from informants. When people fall out, be that business partners or spouses, they often tend to view telling the tax authority as a dish best served cold. An informant’s phone call or email gives HMRC inspectors insights that no database ever could. Tip-offs received by HMRC are then reviewed by investigators with the support of data analysis. Research by the law firm RPC brought out that ‘whistleblower’ fraud reports to HMRC surged 47% in 2023. One motivation for the increase in fraud allegations is considered to be the widespread abuse of the Government’s Covid business support schemes during the pandemic. Whether or not a whistleblowers identity will remain confidential depends upon a number of legal considerations. Where whistleblowing is combined with a business falling out and communication goes beyond HMRC, then litigation may well follow on a number of grounds including defamation, or breach of confidence. Allegations can be contested, and it has long been established that HMRC cannot absolutely guarantee to protect the anonymity of intelligence sources.

Such considerations were evident in the 2024 High Court defamation case of Unity Plus Healthcare Ltd v P Clay and others . Disputed allegations were made against a company by one of its former business development managers in relation to Covid Furlough payments and Covid Bounce Back loans. Interestingly, the allegations appear first to have involved communication being made with the Director of HMRC’s Fraud Investigation Service (FIS) through LinkedIn prior to an email being sent to HMRC. As allegations were also emailed to customers it is unsurprising that the business made a defamation claim.

Business falling outs are often messy and tax disputes can result from them. Covid business support schemes from 2020 might seem like old history but when it comes to investigating allegations of financial crime, HMRC can go back many years (up to 20) if deliberate conduct is involved. Those who fall out with partners would do well to remember the risk of a flag being raised much later than expected.