Over recent years HM Revenue & Customs (HMRC) has invested significantly in developing a state-of-the-art technological system to aid its fight against tax evasion. In 2009 HMRC launched its ‘Connect’ system after it proved outstandingly successful in proof of concept trials. This system which has cost in excess of £80million was built by the BAE Systems-owned Detica in conjunction with computer experts from HMRC’s Risk and Intelligence Service, and HMRC claims that since its inception it has already secured an additional £3billion of under-declared tax revenue.
So how does it work? The Connect system looks for inconsistencies by comparing information from 28 data sources, including Companies House, Land Registry, the Benefits Agency and the Banks (both UK and Overseas) with the information provided by taxpayers on their self-assessment tax returns. The system then flags up potential discrepancies or helps HMRC identify where self assessment returns have not been filed when they should have been. Spider diagrams produced by the system link taxpayers to the properties they own and companies, partnerships and trusts they are associated with to produce unique financial fingerprints for each taxpayer.
The information produced by the system is accessed and analysed by a team of over 3,000 investigators who are able to supplement this data by purchasing further information from commercial sources or even trawling through social media. These investigators then examine the available data and evaluate whether or not it is appropriate to raise an enquiry into the taxpayers affairs. In addition to this a team of about 150 HMRC analysts examine the data to identify patterns and behaviours by groups or sectors of taxpayers. This in turn leads to the formation of specific task forces which focus on particular industry sectors in different areas of the country.
The Connect system is still in its infancy but has already justified its cost many times over and future refinement will only make the system more successful in detecting tax evasion. It would seem that the days of people getting away with not declaring property rental income, interest on overseas bank accounts and inheritance tax liabilities are extremely numbered.
Given the penalty regime that exists in relation to under declaration of income and wealth, now could be the time to come clean if there is any historic income that you have not declared.