HM Revenue and Customs ‘connecting’ the dots (May 2015)

In 2010 HM Revenue and Customs spent £45million on a database which collates information from various public and private sources, such as banks, Land Registry, local councils, social media and the Legal Aid Agency.  Five years later and it is now reported to store more information than the British Library.

The Connect database as it is known, allows H M Revenue and Customs to automatically cross-reference information submitted by the tax payer on their annual Tax Return against information that is held elsewhere.  This ‘other’ information will not just be financial but also lifestyle.  By joining up the dots, HM Revenue and Customs are now able to profile an individual and their related businesses and make a decision as to whether it all ‘makes sense’.

For instance, information received from the Land Registry or planning department may indicate omitted rental income or undeclared capital gains.  Luxury holidays or lifestyle posted on social media when cross-referenced against low profits on a Tax Return will have the Collector of Taxes rushing to your door.

The database can also identify individuals and businesses that fall outside of their industry average.  These are known as ‘outliers’ and their Returns will report lower than average profits or margins that are not the norm.

It is of course hoped that Connect will generate leads that will result in targeting taxpayers guilty of tax evasion.  However, it is just as likely that the system will misinterpret results and jump to conclusions, raising red flags and instigating an enquiry.  This could lead to a growing number of tax payers finding themselves on the receiving end of a tax enquiry that can be a long and costly process.

HM Revenue and Customs are not responsible for any fees incurred by the taxpayer in dealing with the enquiry regardless of the outcome.  The cover offered by the R T Marke & Co tax investigation service allows the accountant to work on behalf of the taxpayer without the worry of an unwanted accountancy bill.  This means that the accountant can achieve the best possible result for the taxpayer.

Click below for more information on the R T Marke & Co tax investigation service which includes a legal, employment and health and safety helpline.