HMRC have been increasing their activities to collect revenue lost from tax evasion for many years now. As we all know, they have also cut costs through job cuts, so just how do they manage to monitor unreported income? The answer as ever is technology and specifically a sophisticated system called ‘Connect’, developed by BAE Systems and which has won several technology awards.
While HMRC has collected information from employers, banks, insurers and other third parties for some time, the collection and analysis of the data used to be a very labour intensive and manual process, where it has often taken a tax officer weeks to build a full picture of a taxpayer’s affairs. The introduction of Connect automated much of the analysis and is both a data collection and data analysis tool, with the ability to draw on and link information from a much wider base.
For example, as part of an HMRC campaign aimed at medical professionals, the Connect system was able to link data from tax returns, hospitals, pharmaceutical companies and medical insurers, resulting in the collection of millions of pounds in unpaid tax. Similarly, a campaign targeting plumbers used information from Gas Safe registrations.
Connect can make use of HMRC’s existing information sources, but is also able to gather new information from online websites including personal and business websites, auction and selling sites such as eBay and AirBnB, and social media sites such as Facebook, Twitter and Instagram. Other information sources include Land Registry records, credit and debit card transactions and property and bank records from offshore countries.
HMRC are continually investing in the system so that it becomes increasingly sophisticated and adapts to new ways of working and with the ability to drill down and link more data for any one taxpayer. Tax evasion is becoming harder and it is imperative that income from all sources is declared to HMRC from the outset rather than them finding out first via other means.