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HMRC increases scrutiny on taxpayers


Posted on 7 July 2015

HMRC are using their data analytics tool, Connect, to increase their scrutiny on individuals and businesses including the monitoring of social media and the analysis of secondary bank accounts held in other jurisdictions.

The purpose of Connect is to look for inconsistencies when assessing income versus expenditure leading HMRC to launch targeted investigations. 

Connect is being used to review online traders such as EBay and Gumtree to assess if the levels of sales suggests activity akin to a hobby or to business trading. 

Additionally, lifestyle profiles are being compiled on individuals by monitoring images of holidays or new purchases posted on social media sites.

Bank accounts are under observation, as HMRC receives annual data showing which UK residents have an offshore account.  With an increasing number of countries signing up to the multilateral information exchange agreements, those with accounts in other jurisdictions may have their account information shared across jurisdictions.

A new standard known as the CRS (Common Reporting Standard) is being introduced in 1 January 2016, which an increasing number of countries intend to implement.

This will mean that any reportable accounts identified by financial institutions will automatically be shared by taxation authorities on an annual basis, giving out the account holders financial and other relevant information.

The above factors make it difficult for taxpayers to find anywhere to hide. Taxpayers who have under-declared tax should consider making voluntary disclosures. Making voluntary disclosures is an option that taxpayers who have something to declare may wish to consider, in order to try and receive a lower penalty rate before HMRC launches a formal tax investigation.

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