How many times have we heard people say – how will they catch me? HMRC will never know!
Well HMRC is biting back. Gone are the days of an Inspector going undercover to sit in a car outside a customer’s house or at the end of a bar, paying in cash. Instead, over the last few years, HMRC have invested a significant amount of time and money on ‘Connect’ – a super computer.
This system is designed to identify those who may have paid too little tax. It can extract information not only from the tax returns submitted by individuals but also from a multitude of Government and corporate sources.
For many years HMRC has obtained data from employers, including payroll and benefits details, pension providers and state pension income.
We are all aware that the banks are required to provide details of interest paid to account holders so no longer can the old adage of ‘it’s less than a £1’ be an excuse – why risk an enquiry for such a small amount?
Did you know that Estate Agents now report the details of all Landlords? HMRC’s Let Property Campaign has been as a direct result of this new information and has enabled them to target non-compliant landlords and levy penalties.
In this digital world, it is ever easier to collate information about individuals. Airbnb, eBay, Land Registry and Companies House records are all available to HMRC. These are quite common areas from which data can be extracted but have you considered that every time you use an electronic form of payment, this data is fed in?
There has been a recent tax case, which required HMRC to determine an individual’s residence. The taxpayer considered themselves to no longer live in the UK but HMRC was able to use electronic data to prove otherwise. Credit card payments to UK restaurants, border control passport logs, and general spending patterns from their bank account. This meant that their worldwide income remained taxable in the UK.
The Connect system looks at your position as a whole and has trigger points which increase the chance of a review. This could be missing bank interest off or profit and loss figures looking skewed based on a regional average of similar trades.
It is therefore even more important to ensure that your Tax Returns are reporting the correct information. If you think that you may be at risk or need to make a disclosure to HMRC, please speak to our tax specialist, Lucy
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.