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HMRC is using ‘big data’ to paint a picture of you to assist in minimising the tax gap

Big data is often talked about in the technological and digital industries, but it’s more widespread than that, indeed, HMRC are utilising big data systems to paint a picture of you, and everyone.
In 2010, HMRC launched its ‘Connect’ database, a system built by BAE, which gathers data and information from multiple public and private sources, including banks, local councils and even social media, to help HMRC identify where tax avoidance may be occurring.
Similarly, it allows HMRC to automatically cross-reference one piece of information, (say on an individual’s tax return) against another (say the Land Registry). This system is to be taken seriously – as it contains more information than the British library, but is automated so information is available at a click.
These flags/ triggers (known as outliers) could identify individuals or businesses who have seen a rise in income, or indeed, a drop. Or they could’ve stayed the same but something else has piqued HMRC’s interest. The point being, this system automatically benchmarks sectors and individual’s personal circumstances which may not necessarily be indicators of tax evasion, yet HMRC could open an investigation regardless.
Should your business find itself as one of these outliers, it’s important to take HMRC very seriously, but to ultimately know your rights. The HMRC taskforces have a very impressive track record and may in some instances undertake extensive aggressive investigatory work. Teams can turn up at any time, unannounced, to inspect premises and accounts. Often, a professional advisor may be the only one able to advise on such procedural matters and guide clients as to what to do.
We have seen an increase in enquiries targeting property income and businesses. Whilst the UK Treasury continue to change the way property income is taxed and alter the expenses allowable to be deducted, the investigation teams are particularly interested in individuals with rental income.
HMRC have numerous sources to obtain data related to property. We’ve seen cases whereby individuals have unintentionally omitted certain property income from their tax return (for example where it’s a shared property, outside of the UK, or breaks even and as such clients presume it’s not required on the tax return). HMRC cross-reference returns with the Land Registry, UK and foreign bank account information to check the beneficial ownership of property.
If HMRC argue this is intentional rather than careless they can impose penalties of up to 100% of the tax owed (on top of the additional tax).
Enquiries can often last months, even if HMRC find nothing at fault. Accountants’ fees to respond to such ongoing enquires can mount up even for fully compliant individuals or businesses.
Protect yourself today – find out more about Tax Investigation Service.

This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.


The information was correct at time of publishing but may now be out of date.

Posted by Cowgills
6th April, 2017
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