HMRC are stepping up their tax avoidance crackdown, and they’ve got a hi-tech weapon to help them do it.
Only a few years ago tax investigators faced many months of preliminary information gathering before deciding whether a taxpayer was liable to a tax investigation. Now they can do this in seconds.
HMRC has invested over £80 million in developing their Connect software, a powerful computer programme which accesses databases of personal and commercial financial information and matches findings to tax returns to flag discrepancies.
The system is able to link a tax payer to property addresses, companies, partnerships and trusts, accessing more than 30 sources of data which currently fall within its scope – and now its reach is increasing.
It is reported that from next year Connect will become even more powerful, as HMRC gain access to files held by banks and financial firms based in British overseas territories. From 2017, Connect is set to go global, with access to data in 60 countries.
HMRC use Connect to find undeclared tax and have reportedly secured an additional £3bn in tax since its launch in 2008.
Access to additional data will increase their ability to identify activities or assets which are not being properly taxed. For example, by accessing Land Registry databases and mortgage information, Connect can identify the price you paid for a property and flag areas where capital gains tax is potentially owed.
We have already seen HMRC target online marketplaces for their records recently and as Connect gets more powerful they will be able to access this data quicker, cross-referencing it with your bank account and other records to identify discrepancies. If you become the subject of an investigation, Connect could even examine your social media activity for evidence of spending, travel or ownership of property and assets.
The strong message from HMRC is that it’s much better to get your records in order now, rather than try to hide. Penalties are based on taxpayer behaviour, so if you voluntarily disclose an issue your penalties are likely to be much lower than if HMRC discover it and approach you.
HMRC campaigns are also in place to give taxpayers the opportunity to bring their records up to date under the best possible terms. Businesses who accept card payments and landlords who collect income from residential property are two of the current targets being encouraged to voluntarily disclose.
If you have any concerns or you need help staying on top of your taxation matters, contact us today. We can offer advice on planning for the future of your business and assistance in dealing with income tax (self assessment), corporate tax, capital gains tax, inheritance tax, stamp duty, VAT and PAYE. Insurance against tax investigations can also be arranged.
Call us on 01905 777600 to arrange a free initial consultation.