In the digital age HMRC have developed a super weapon in the detection of tax evasion. Connect compares, compiles and analyses data in databases that the government has access to providing HMRC with a list of taxpayers with anomalies in their records.
Year on year HMRC are adding further resources to the system with the approval of new information gathering powers and information sharing agreements with other governments.
Historically HMRC's investigations would have been sparked by either a tip off or an inaccuracy noticed during the process of reviewing taxpayer's submitted returns. HMRC still had the power to request information from other institutions but naturally things took longer with correspondence to build a case taking weeks or perhaps months which meant significant cost to the taxpayer.
That couldn't continue. In the digital age the system was not fit for purpose and with globalisation there was heightened concern over tax evasion. HMRC commissioned software, named Connect, which does exactly as its name suggests.
The Connect system will cross check and identify anomalies across the information silos that the government has access to. This could be bank information, the DVLA, the Land Registry. It gives them a phenomenal amount of power and reduces the time investment in the pre-case work from weeks and months to minutes.
A simple example would be a taxpayer having their residential address in one location and also owning another building; the system will raise the possibility of that individual hiding rental income from HMRC and flag them for investigation.
Where is this going?
Having already proved its worth the system will be extended to enable access to private company databases including banks and building societies to provide information on income and expenditure.
Already Connect is being used to trawl online marketplaces and social media sites to obtain information on trading and spending and this is seen to be a key area for expansion of the system's capabilities in delivering more tax revenues.
There seems to be little places that the tax evader can hide in the future, particularly when you consider the decline of the prevalance of hard cash. That can only be a good thing for the honest taxpaying population.
That said, completing your tax return can be quite a challenge and mistakes will happen. Unfortunately Connect does not make any allowance for mistakes and any suspicious activity, innocent or not, will likely result in an investigation. Taxpayers would be advised to seek professional assistance in completing their return to mitigate the risk of any error.