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HMRC: We Have the Technology

How HMRC have joined up all the dots to spot avoidance

Technology has been the catalyst for huge change in the way we do business, all over the globe. As the world shrinks because of increased connections then we are all drawing closer together and barriers are broken down. This, however, results in greater transparency and allows HMRC to see the bigger picture and uncover previously hidden patterns that are extremely useful to them in their investigation work.

In 2009 HMRC launched its Connect computer system. The system was designed by the defence contractor BAE Systems who worked closely with HMRC’s computer whizzes in its Risk and Intelligence Service. To date, £80 million has been spent on this system but it is worth its weight in gold to the Revenue. Since its introduction it has helped to bring in an additional £3 billion of taxes and has therefore more than paid for itself.

‘Connect’ allows an investigator to spot a pattern of concealment at a glance. It works by linking tax records with data held by third parties such as:

  • Land Registry
  • Companies House
  • Benefits Agency
  • Hospitals
  • Insurers
  • UK and offshore banks

Using a mathematical technique known as social network, the award winning system then trawls through this third party information and compares it with Self Assessment records to identify those taxpayers who may not be declaring all of their income. It will then produce a ‘spidergram’ that links a taxpayer to property addresses and businesses. An investigator becomes familiar with a normal person’s spider diagram but someone who is operating within the hidden economy will throw up a different pattern.

To understand the importance of ‘Connect’ in the Revenue’s war on tax avoidance and evasion the enquiry statistics speak for themselves:

Year Enquiries generated by Connect
2011/12 62%
2011/13 77%
2011/14 83% (target figure)

Such is the accuracy and sophistication of ‘Connect’ that anyone who is selected for enquiry by reference to the system is very likely to be guilty of a tax offence.

What would have taken a mere mortal months to analyse data, if indeed it were possible, is done in an instant as this sophisticated system uses analytics to spot connections that show the true level of income and spending that reveal those evading tax.

Some of ‘Connect’s’ notable successes include:

  • Uncovering organised gang fraud that involved repayment claims being sent to the same residential address.
  • A successful author failed to include a number of sizeable receipts in his accounts that resulted in him paying back in excess of £900,00 in tax, interest and penalties.
  • An individual who was found to have 11 undisclosed properties in several Mediterranean countries that had a combined cost exceeding €1.3 million, yet he only declared UK income of just £6,000.

HMRC claim that they hold more data than the British Library and this smart piece of kit is only likely to increase their knowledge resources and leave no stone unturned.

By Andy Vessey

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