HM Revenue & Customs is taking tougher action to find those who try to avoid paying their tax, with a variety of methods available to detect those who cheat.
Social networks, careless gossip and being reported by an old friend or partner are just some of the ways HMRC can discover tax cheats. Here are some examples of how authorities spot a cheat:
Computer systems
HMRC now has access to sophisticated systems that can weave a web of the expected behaviour of an individual. Anomalies are highlighted and can reveal tax cheats to the organisation. Connect was launched in 2010 and has already paid for itself in additional revenues, according to the National Audit Office.
Information from third parties
HMRC can use information from third parties to check that you are declaring income and paying the correct amount of tax. For instance, HMRC has access to DVLA and the Land Registry, so can see how many properties and vehicles you own, along with the type. As an example, if you declare income of £30,000 but live in a house worth £500,000 and drive a Porsche, you may become the subject of an investigation.
Information online and in local areas
HMRC can obtain information from everyday sources you may not consider to be third parties, like the local ads in the newspaper or comments you make on your social media site.
If you brag about your lavish lifestyle and post pictures online of flash cars, a huge house and expensive holidays, but declare an income that doesn’t match up, HMRC may want to know more. Tax inspectors often use this information to find out more about those suspected of cheating the system.
Owning property overseas
HMRC has created a team dedicated to checking those who are deemed to be ‘affluent’. This unit uses ‘sophisticated data mining techniques’ to check the compliance of those who have a worth below £20m and pay tax at 50 per cent.
The system identifies overseas property owners and then uses more tools to identify those who don’t seem to have the income to afford the properties legitimately. The system can also identify those who haven’t declared accurate gains and income from the property.
Always make sure that declarations of your income and expenditure are accurate and correct. You safest bet is to consider outsourcing accounts to a reliable and ethical accountant. Call us to discuss your needs in more detail.