Chartered Accountants and Professional Business Advisers

HMRC’s new super computer ‘Connect’ – dubbed the ‘snooper computer’ by the media – gathers information about your income and lifestyle from a wide range of sources.

Any discrepancy between this and what’s included on your tax return could trigger an enquiry or compliance check. The difference between the tax revenues that HMRC expects to come in and what it actually collects is known as the ‘tax gap’. Tax evasion and avoidance by businesses and individuals contribute to the tax gap, along with error, failure to take reasonable care, non-payment, legal interpretation, the hidden economy and criminal attacks on the tax system.

HMRC’s number one objective is to maximise tax revenues and bear down on avoidance and evasion. As more and more people submit information digitally – 9.6 million ‘customers’ filed their 2016/17 selfassessment returns online before the 31 January deadline – HMRC is able to focus a greater proportion of its staff and resources on closing the tax gap. In the summer 2015 Budget, the Government announced £800m for HMRC to spend on checking up. Over recent years it has invested almost £100m in the Connect system.

The big picture

Connect gathers information from a range of government and corporate sources to create a profile of your total income and lifestyle. If this differs from what’s included on your tax return, an enquiry or compliance check may be triggered. So it’s more important than ever to file accurate tax returns. Understandably, details of exactly how it works are not available but the information sources it draws from are believed to include:

  • Bank accounts – in the UK and more than 60 other countries
  • Employers payroll records – salary, benefits, share options etc
  • Local government (e.g. properties rented for social tenants)
  • DVLA – vehicles purchased and owned
  • The Land Registry – properties purchased and sold
  • Websites such as AirBnB and peer-to-peer lending sites and your browsing history
  • Visa and Mastercard transactions
  • eBay
  • Social media websites – e.g. Facebook, Twitter and Instagram
  • Gas safe registration

There’s no doubt that enforcement efforts are proving a worthwhile investment, as the tax clampdown last year brought a record £28.9bn to government coffers!

HMRC also had quite a good year in court – of the tax avoidance cases in 2016/17 the scoresheet reads: HMRC won 22, drawn 1, lost 3. Most of the cases won by HMRC in 2016/17 related to events that took place up to ten years earlier, but it does highlight the need to be realistic in deciding whether to go all the way to court.