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Taxpayers: Is HMRC watching you?

Over the last few years HMRC has developed a range of innovative methods for identifying potentially undeclared earnings of individuals and businesses.

CCH Fee Protection has found that HMRC’s Irish counterpart has already started to browse social networking websites. “Although there have been no disclosed cases yet in the UK, it is just a matter of time before HMRC starts to use this new technique,” Peter Horgan, Managing Director of CCH Fee Protection, believes.

CCH Fee Protection advises caution when posting information about their personal and business affairs on the internet. Individuals tempted to inflate their business interests on professional networking websites such as LinkedIn, or talk up their personal wealth by exhibiting their new luxury car or boat on Facebook, should think twice as this could spur investigations by the tax authorities.

Peter says: “Online data like this could lead tax inspectors to make assumptions about your earnings and lifestyle. If this impression doesn’t tally with the income you report to HMRC it is likely that you will get investigated. CCH Fee Protection is already aware that HMRC looks at local newspapers and media databases to build up a profile of individuals it is targeting, so it is inevitable that it will look to the internet as an additional source of information.”

Other examples of methods currently used by HMRC to detect people with undeclared earnings and capital gains and unregistered businesses include:

• Scanning council planning applications and building control records online to search for households that have undertaken works and then requesting details of the builders who carried out the work

• Gathering lists from mortgage lenders and estate agents with details of landlords who own buy-tolet
properties. HMRC is also investigating the use of data from tenancy deposit protection schemes, with which landlords must register (a possibility that CCH warned of when the scheme was launched last year)

• Sharing intelligence with other public sector organisations to carry out cross-working activities, e.g. collaborating with immigration officials to identify unregistered businesses, which happened in the nail bar industry

• Buying data from whistleblowers on offshore bank accounts, e.g. Liechtenstein bank accounts

• Advanced search engines known as ‘web robots’ being used to hunt for online traders that make high-volumes of transactions on auction websites such as eBay or to search for rental properties, to compare with reported rental income from landlords

CCH Fee Protection points out that HMRC has become increasingly effective in its use of new technologies, while the National Audit Office, the public spending watchdog, is urging further measures. 

In a recent report, Tackling the hidden economy, the National Audit Office has recommended that HMRC should, for example:

• Analyse data from the DVLA to identify owners of high value cars and commercial vehicles

• Use more extensive data matching techniques to detect individuals who are paid in cash in risk sectors such as home repair, maintenance and improvement

• Collect lists of landlords that receive local authorities housing benefit 


Peter adds: “If the economy slows and the revenue generated by Corporation Tax and personal taxes dips, HMRC will come under pressure to help make up the shortfall via more intensive compliance work.”

Article contributed by Croner