In today’s modern digital age, it is increasingly hard to avoid the many methods HMRC uses for catching tax cheats and those looking to bend the rules. HMRC has come a long way in recent years, and it now combines both modern technology and traditional methods, which cover quite a lot of suspicious ground. Have you recently posted on Facebook an image of your new flash car? Do you have a disgruntled ex. partner who knows about your undeclared income? HMRC now operates a tip-line for anyone who would like to report about suspected tax evasion.
As always, we recommend that you declare all income, and assets in accordance with HMRC guidelines and UK tax-law and legislation, or simply speak with your accountant if you’re in any doubt.
Here are the 10 most familiar tactics HMRC uses today.
Espio-Tax - 10 ways HMRC can tell if you are cheating the tax system
HMRC operates a powerful weapon against tax evasion called Connect, a program that automatically analyses data from multiple sources that they do not reveal. Connect is a computer system that includes social network analysis capabilities and data mining. It was developed by HMRC to cross-references business’s and people’s tax records with other databases and to establish fraudulent or undisclosed (misdirected) activity. HMRC Connect also interfaces with financial information from British Overseas Territories (which have been known tax havens) and with around sixty other OECD (Organisation for Economic Co-operation and Development) countries.
Long suspected as one of HMRC’s best sources of data gathering and going strong after many years, the HMRC tip-line and online reporting allow the general public to report whoever they want, anonymously or for a “tip” with payouts in the tax year 2017-18 reaching £343,500. Reasons for reporting evasion generally include disgruntled ex-employees, estranged partners and jealous rivals.
Social Media sites such as Facebook, LinkedIn and Twitter are the modern day hunting ground of the HMRC inspector. Prior to investigations they can be reviewed or can be the cause of an investigation from advertising services that are not declared on tax return to showing of house renovations and large purchases.
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Prepared by David Crossley and Ron Maoz