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Autumn Statement: HMRC and the lives of others

by Daniel Ruthven on November 25, 2015 No comments
HMRC Connect

Today’s autumn statement revealed a fresh clampdown on disguised remuneration schemes, with the 2014 enquiry window still open for many, you may yet still find the dreaded brown envelope falling through your letterbox, however the difference this year being that, in all likelihood, the letter would have been generated automatically by HMRC’s new Connect database system.

Since 2008 HMRC has collected a total of £3 billion from enquiries generated from this multi-million pound snooping tool, meaning that it has paid for itself almost 38 times over.

With results like this it is inevitable HMRC will continue to invest heavily in this and other similar integrated systems.

This could however result in more innocent clients finding themselves under the spotlight. The rigidity of a database system means that red flags may be raised on a taxpayers affairs where there is no real cause for concern.

Connect allows HMRC to cross-reference information supplied on tax returns with data on individuals and businesses finances stored elsewhere. It gathers information from multiple public and private sources, allowing for the quick identification of any discrepancies or possible under-reporting.

HMRC has invested £80 million in the system since 2008 and currently employs over 150 analysts tasked with gleaning insights from the information collected. Connect now automatically collates information from over 30 databases, covering details of taxpayers salaries, bank accounts, loans, property and car ownership.

HMRC also has powers to request one-off bulk data from third parties where there may be particular cause for concern. In one recent incidence, Insurance companies, hospitals and dentists supplied information to HMRC in order to assist with the Tax Health Plan, a disclosure facility set up for medical professionals.

The system also allows HMRC to zoom in and keep tabs on taxpayers day-to-day activities. Officials can even track ticket sales and passenger information supplied by airline companies. Frequent flights are likely to raise questions about how an individual is funding a jet-set lifestyle while regular trips to known tax havens such as the British Virgin Islands or Monaco are also likely to raise concerns.

Any involvement with charitable bodies is now also being tracked via a direct link to the Charities Commission database. Any payments linked to trusteeships held by a taxpayer will be monitored, to ensure that they are being declared in full.

Particularly striking is the gathering of information from social media. HMRC are now monitoring online posts about holidays, parties and purchases. They may wish to ask questions where they feel a lifestyle does not fit with an individuals reported income.

Whilst many of the leads generated by Connects collation of wide-ranging data are likely to be worth following up, a proportion will be unfounded. A surface analysis of data or online information could quite easily lead to misinterpretation. An exaggeration over twitter or Facebook, for example, could paint a highly inaccurate picture.

The Revenue is increasingly using Connect to establish whether leads supplied by real-life informants via the online Tax Evasion Hotline are credible. HMRC is now paying out record sums to informants, handing out £605,000 over the last year, which means at least some reports will be motivated by financial gain.

The increased reliance on an automated system to verify information provided by these individuals could mean that a larger number of unsubstantiated claims are looked into. Connect, of course, could be misled by the same false flags causing the informants to suspect tax evasion.

With the threat of an investigation mounting, more taxpayers are opting to protect themselves by taking out insurance.

F9 offers a unique service whereby we provide all clients FREE fee protection cover. This ensures that should an enquiry be raised, we are able to throw all the necessary resources at resolving it, without it costing you a penny.

If your current accountant is not providing this, or is charging you in excess of £400 a year for the privilege, isn’t it time you asked why?

Contact us today for a free no obligation consultation. We have accountants in Canary Wharf and Brentwood waiting to take your call.

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Daniel RuthvenAutumn Statement: HMRC and the lives of others

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