What does the taxman know about you... your finances? your lifestyle?

July 15th, 2015

HMRC 's impressive new software trawls billions of items of data from dozens of sources in its hunt for underpaid tax – and it's about to have access to even more information, which can be shared with 60 other countries.

(image: 59e4fa1e90c99.jpg alt: AMA Business Systems


The offices of the taxman are not usually credited with efficiency and success. But there is one aspect of HM Revenue & Customs which is highly – some would say terrifyingly – efficient, and that is its powerful computer program which is accessing and trawling databases of personal financial information on an unprecedented scale. The software, called "Connect", has been developed at a cost of £80m over seven years. Its basic job is to scour vast databanks of personal and commercial information, seeking to unearth links between individual taxpayers and businesses, income, assets and transactions. It then matches its findings against the information the taxpayer has provided through their return. Discrepancies are flagged and could prompt a tax investigation. The searches take mere seconds and are undertaken repeatedly to capture new information. The reach of the "Connect" project, and the speed with which the databanks can be interrogated, are both increasing. More than a billion items of data from 30 sources already fall within its scope, according to the accountancy group BDO, which has just published a report on HMRC's "digital evolution". These sources include public sector records – such as the Land Registry or DVLA, as well as a growing number of private businesses or trade associations. From next year Connect's powers will extend further still. September 2016 is when HMRC starts having access to files held by banks and other financial firms based in British overseas territories, such as the Channel Islands; and from 2017 Connect goes truly global with access to data in a further 60 countries. A success? Yes, in that the numbers of investigations initiated by Connect are growing, and in that £3bn extra tax has been clawed in as a result of Connect since its launch in 2008. But many have their doubts. Not only is there a possibility that some of the data could be erroneous or incomplete – triggering spurious tax investigations or worse, possible prosecutions – but there are also fears about security. And then, of course, the niggling anxiety about so much of our personal information residing in the hands of the state. #### So what can HMRC find out about you?

Your income and pensions, Your bank accounts, savings and investments, Your property, Your lifestyle and shopping, Your business, Your car, Your social media ...

From 2016 financial institutions in British Overseas Territorities will share data with HMRC. From 2017, this extends to 60 other OECD countries and by 2020 virtually all countries will have some form of data-sharing agreement in place. In theory the data should always flow to the country where the individual is resident for tax purposes. So HMRC would share data with another country only if the individual was due to pay tax there. In turn, HMRC would want bank account data from say, South Africa, where it related to taxpaying residents here. Read more...