How HMRC Investigations Can Make Use of Your Digital Footprint

At Lines Henry, overdue tax is one of many factors which cause businesses and individuals to seek the aid of an Insolvency Practitioner. HMRC are under considerable pressure to increase the unpaid tax they recover and thanks to their increased powers and use of ever more advanced methods, they’re more likely than ever to find those who haven’t paid their due. What form can HMRC Investigations take and what data can they access?


Online Platforms and HMRC Investigations

Data is a commodity and anyone who remembers the Cambridge Analytica scandal will be aware just how much information about ourselves is stored and disseminated by the various businesses and services we use regularly, both online and offline.

If you’re not paying to use a product, then the product is you, or so the saying goes.

Almost all of us have a digital footprint and it’s not just advertisers who have an interest in tracking where we walk.

HMRC are known to be using a software system of their own, to trace and analyse the complex network of relationships, spending and interaction we all have. Known simply as ‘Connect’, this software was launched in 2010 and using it HMRC are able to compare a complex spiderweb of financial data and contrast what looks ‘normal’ based on an analysis of the behaviour of millions of people and businesses. Being able to model what looks normal, allows the software to pick out what looks suspect when it comes to tax and can then provide insights into who might not have paid the tax they should.

This kind of data mining would be all but impossible for human tax agents, but for the ‘Connect’ software, this analysis can be done quickly and efficiently, drawing together and cross referencing a complex pictures of financial activity from a rich variety of sources.


What information can HMRC Access to look at your tax affairs?

Thanks to the Investigatory Powers Act, sometimes referred to as the ‘Snooper’s Charter’, businesses, from financial institutions to social media companies and various online platforms, could be compelled to hand over all kinds of information. While there was a ruling in April last year that this act had to be rewritten as it breached certain rights under European law, in practice, HMRC still has a wide range of avenues to explore when seeking to acquire data about the financial transactions and habits of those it’s interested in.

If someone is regularly posting luxury holiday photo’s on Facebook, but is paying very little in the way of income tax or national insurance, HMRC might be interested in how someone on such a low income can afford such things.

Most large capital purchases like houses, cars, land etc involve the ownership and transfer of such things to be registered and stored on a collection of databases, like the DVLA, the land registry and others. Even smaller purchases are often registered in some way, even if that’s only via the bank account or credit card used in the transaction.


Offline HMRC Investigations

While much has been made of the technology and data mining techniques more recently used in HMRC investigations, it’s important to remember that ‘old fashioned’ methods of investigation such as old fashioned accounts analysis, and property or business raids are still in use in order for the Taxman to build a picture of a business or individual’s true financial worth. Disgruntled ex-employees or former partners willing to turn informant will also find a ready ear with HMRC.

With the myriad means HMRC has at its disposal, those who are trying to avoid paying the tax they owe. Such individuals are ever more likely to be come under scrutiny from the taxman and it’s getting ever more difficult to hide assets from a system which has given HMRC the processing power and analytical ability to track patterns and money trails far beyond what they’d have been capable of previously.


Worried About HMRC Investigations?

Being in debt to anyone can be extremely stressful and owing money to HMRC particularly so. If you’re behind on what you owe the treasury, or are worried about the implications of some less advisable decisions you’ve made in the past, it’s often the case that dealing with such an issue head on is less painful than allowing the worry and the stress to continue.

If you’re in such a situation, why not contact us for a free consultation and we’ll look at your situation objectively and advise what to do next.

Speak to us, we can help.