Tax­man un­leashes ‘snooper com­puter’

The Daily Telegraph - Your Money - - FRONT PAGE -

HMRC is start­ing to mine its vast hoard of data to spot sus­pected non-pay­ers. What does it know about you, asks Laura Suter From this year the tax­man can ac­cess bank data from 60 coun­tries

HM Rev­enue & Cus­toms has spent years and £100m or more on a su­per­com­puter de­signed to iden­tify those who may have paid too lit­tle tax. And now – with the dead­line for fil­ing 2015-16 tax re­turns just weeks away – the sys­tem is be­ing fully de­ployed for the first time.

In­stead of re­ly­ing solely on in­for­ma­tion pro­vided by tax­pay­ers via their re­turns, HMRC’s pow­er­ful “Con­nect” sys­tem now draws on in­for­ma­tion from myr­iad govern­ment and cor­po­rate sources to cre­ate a pro­file of each tax­payer’s to­tal in­come. Where this varies from the in­for­ma­tion pro­vided by the tax­payer, the ac­count is flagged and could be sub­ject to fur­ther in­ves­ti­ga­tion.

For the first time, HMRC is also us­ing these pow­ers to warn in­di­vid­u­als to check that they have not un­der­paid.

Last month it sent let­ters to 10,000 in­di­vid­u­als who had submitted their 2014-15 tax re­turn with­out a com­plete dec­la­ra­tion of sav­ings in­ter­est re­ceived.

HMRC said it had used in­for­ma­tion gath­ered from banks, peer-to- peer lenders such as Zopa and other fi­nan­cial in­sti­tu­tions and then checked it against in­di­vid­u­als’ tax re­turns. It sent let­ters to those with dis­crep­an­cies.

A spokesman said: “We have writ­ten to cus­tomers who ap­pear to have un­der-de­clared un­taxed in­ter­est.”

The Con­nect sys­tem’s data­hoard­ing does not stop at the in­come peo­ple have re­ceived from work and in­vest­ment.

“Con­nect broadly deals with in­for­ma­tion spon­ta­neously avail­able in govern­ment de­part­ments or as part of the dig­i­tal foot­print that peo­ple leave when they use the in­ter­net,” said Ge­orge Bull, se­nior tax part­ner at RSM, the au­dit­ing and con­sult­ing firm. “We all leave a mas­sive elec­tronic foot­print of where we are, when we are away, what we do and what we spend.”

The Con­nect sys­tem crunches data from Airbnb, the rental plat­form, for in­stance, or eBay. It can also ac­cess Land Reg­istry records to see houses pur­chased and en­sure the cor­rect tax has been paid. From there, fur­ther sources en­able it to de­ter­mine if prop­er­ties are be­ing rented out and whether that in­come has been de­clared. It can also de­ter­mine if some­one is likely to be able to af­ford such prop­er­ties, or whether they are sus­pected of hav­ing used pre­vi­ously un­de­clared in­come or sav­ings.

HMRC gains anonymised in­for­ma­tion on all Visa and Mastercard trans­ac­tions, en­abling it to iden­tify ar­eas of likely un­der­pay­ments which it can then tar­get fur­ther, seek­ing de­tails of in­di­vid­u­als’ trans­ac­tions where nec­es­sary.

As of Septem­ber last year, HMRC can now get in­for­ma­tion from banks and fi­nan­cial or­gan­i­sa­tions in Bri­tish over­seas ter­ri­to­ries, such as the Chan­nel Is­lands, while from this year it can gather this in­for­ma­tion from 60 more coun­tries.

“This is the tip­ping of the scales,” said Richard Mor­ley of ac­coun­tant BDO. “Five years ago those mak­ing mi­nor tax er­rors would feel fairly safe. But HMRC now has more in­for­ma­tion and more ac­cess to in­for­ma­tion.”

HMRC will also be one of the govern­ment bod­ies to gain ac­cess to in­for­ma­tion un­der new laws known com­monly as the “snoop­ers’ char­ter”. The leg­is­la­tion means tele­com providers store cus­tomers’ web brows­ing and email records for at least a year; it can then be ac­cessed by the Govern­ment.

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