HMRC have greater powers

Posted by admin - October 25, 2016 8:03 am HMRC’s Information Powers

………..more weapons in the fight against tax evasion!

In recent years HMRC has been gathering data from new sources to ensure that individuals are paying their taxes correctly. The “Connect” software they have been using was designed by BAE Systems at an estimated cost of £45m. The job of this software is to link individuals to businesses, income, assets and transactions in the hope to unearth unpaid tax.

According to the National Audit Office, since its launch in 2010, it has delivered £1.4 billion of additional revenue. This has been achieved by searching its database which consists of data from other databases such as the Land Registry, Companies House and the electoral roll.

The “Connect” system has given HMRC the power to collect a wide range of data about taxpayer’s financial affairs. Since 2013 HMRC has also been able to collect data on credit and debit card transactions to help them identify traders who are either not registered for tax, or who are under-declaring their income.
On top of this, further legislation in the Finance Act 2016 has given HMRC more powers to delve into the so-called “hidden economy”. This includes further extending their power to bulk data gather by accessing details of Money Service Businesses such as those that transmit money, cash cheques and also currency exchange. This means transactions such as those preformed by “online traders” going through PayPal will now be part of the data HMRC holds.

So what does this all mean?

HMRC have access to data that could tell them if;

  • A second property is owned, therefore rental income may be being received and not declared;
  • A second property has been sold, therefore Capital Gains Tax may be due;
  • A secondary source of income is being received through an online ‘trade’ and not declared;
  • Outgoings are more than declared income.

With HMRC flexing its muscles with the amount of data it has access to any undeclared income is unlikely to remain undetected. HMRC have a strict penalty regime and disclosed errors are treated much more favourably than discovered errors.

If you have any concerns of questions about what this may mean for you then please do not hesitate to contact your local McCabe Ford Williams office who will be more than happy to talk you through any concerns.