Since 2009 HMRC has been using its software known as Connect. This system compares taxpayer tax return records to more than one billion pieces of information. Most people will not be surprised by some of its uses but others are slightly more “Big Brother”. Here are a few of the things HMRC are likely to check:
- Employment and Pension Income – HMRC can compare our tax return entries with information submitted by Employers and Pension providers and immediately identify any differences.
- Interest on Savings – HMRC also compare interest figures included on our tax returns to interest figures supplied by banks and building societies , not only to check that the correct amount has been declared but also to ensure that ISA limits have not been exceeded.
- Foreign Savings – Connect checks not only UK bank accounts but accounts in other countries.
- Pension Relief – If we claim tax relief on pension contributions, Connect can look into our pension funds to check that the contributions have actually gone in.
- Property Ownership – Connect allows HMRC compare Land Registry records for cases of multiple property ownership to check for undisclosed rent and capital gains and SDLT avoidance.
- EMarketplaces – HMRC polices emarketplaces such as eBay for unusually high activity that may indicate a business rather than just selling personal items.
- Lifestyle – HMRC can link to DVLC records to satisy themselves that our income matches our lifestyle. It can also spy on our Social Media pages, such as Facebook, for evidence of exotic holidays etc. It is believed that HMRC has access to airline records to check journeys in and out of the UK.
- Penalties – Penalties for getting tax returns wrong are severe; in 2016 it was reported that so far the Connect software has raised more than £3 billion in extra tax revenues.