HMRC has revealed that there are now 55 billion items of data relating to taxpayers in its ‘Connect’ AI system*, which it uses to target taxpayers for tax investigations, says tax investigation insurance experts PfP.
HMRC’s ‘Connect’ is an AI system that uses data from a wide range of sources to identify potential cases of tax evasion and avoidance. It is used by HMRC to select individuals and businesses for further tax investigations. The database has now grown to 6100 gigabytes of taxpayer data.
Connect allows HMRC to quickly analyse information that would previously have required a huge amount of time and human resources.
Examples of what Connect can do:
· Cross-check property ownership data from the Land Registry, client lists from estate agents and online property rental ads against tax returns. This will reveal a list of buy-to-let landlords who might be underpaying tax on their rental income
· Cross check overseas bank accounts and investment accounts against tax returns which will identify taxpayers who might be under declaring investment income or capital gains
The system gets data from numerous sources, including:
· Web browsing and email records
· Social media
· Flight sales and passenger information
· DVLA records
· E-retail platforms
· Individual and corporate tax returns
· The Land Registry
· Online property rental platforms
· UK Border Agency
· Bank and credit card records
The development of the system was driven by HMRC’s determination to close the ‘tax gap’ – the difference between the amount of tax that should be paid to HMRC in theory and the amount of tax that HMRC actually receives. Last year the tax gap stood at £32 billion**.
Kevin Igoe, Managing Director of PfP, says that “Connect is now at the core of HMRC’s tax investigations. It allows HMRC to analyse billions of data points to pinpoint taxpayers for closer scrutiny. It’s an incredibly complex and intelligent computer system. However, the system can easily produce ‘false positives’ and trigger investigations into innocent individuals and businesses.”
“Due to the ‘automatic’ nature of the Connect system, innocent taxpayers can end up under investigation through no fault of their own. Having specialist insurance to cover what can be the very substantial costs of a tax investigation can be of real benefit.”
Tax investigations can be very stressful and costly for those involved, as it often requires the use of specialist professionals including lawyers and accountants. Having insurance to cover these costs can help to significantly reduce the impact of a tax investigation.
