What is searched almost 13 million times in a year, contains 22 billion lines of data (more than the British Library) and would, if printed out on A4 paper, be over 28 times the height of Mount Everest?
The answer is CONNECT - HMRC’s enormous data engine. This powerful and sophisticated system enables HMRC staff to apply complex analytical techniques to spot suspicious activity and potentially undeclared tax.
CONNECT pulls together data from a wide range of sources. It contains tax returns, details from published accounts and bank interest as you might expect, but also data from social media and credit card payment processers. By cross-referencing all this data, HMRC can spot if someone’s expenditure or lifestyle is out of step with their declared income. For example a high volume of credit card transactions processed by a specific trader might suggest a business is being operated which may have taxable profits to declare.
CONNECT also has access to details of properties acquired and sold via Land Registry. If you have more than one property that might imply a source of rental income, and the system will duly check your tax return. HMRC will also search the internet to see if the property has been advertised with a letting agent.
The system uses a combination of data analysis techniques and highly trained staff to ensure that inspections and enquiries can be focused where HMRC believe their efforts will be best rewarded with additional tax.
Soon CONNECT will have more information available to it, as the Common Reporting Standard (CRS) comes into effect. Tax authorities around the globe will start exchanging information in 2017. Under CRS, banks and other financial institutions will need to report details of accounts held by non-residents to their local tax authorities. This information will then be exchanged so the country where the person is resident will learn if there are undeclared foreign assets and income.
For a UK resident with an account in France, the bank may already know or suspect that the owner is UK resident if the account address is in the UK. Once UK residency is confirmed, the bank must report specified details including interest and account balance to the French authorities. French and UK authorities will then exchange information, so that HMRC will learn of the existence of the account and can look for relevant declarations.
As at February 2016 80 countries have signed up to CRS. This number has grown steadily over recent years, although not all signatories will be ready to exchange information by 2017. Already very powerful, CRS will add to the reach of CONNECT and its ability to identify those who have, innocently or not, made a less than full disclosure.
If you have any concerns about your affairs then our award-nominated enquiry team will be more than happy to help review your affairs and assist you in making any necessary disclosures. It is always better to go to HMRC upfront, than wait for them to make a connection.
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