What does your digital footprint tell the tax man?

With the 2017/18 deadline for Self-Assessment Tax Returns a matter of weeks away HMRC computer systems will be going into overdrive to spot the tax cheats. The digital footprint provides the clues HMRC needs to track down their suspects.

Is your tax return error free?

Are you one of the 10 million completing your Self-Assessment submission? It would be wise to pay more attention than ever before to minor details.  You may think you are doing your best and minor mistakes don’t really matter. This is most definitely no longer the case.

can effectively track everyone’s digital footprint to assess who is paying
enough tax and catch tax cheats.

Read on to discover how HMRC can track and use your digital footprint data.

What is a digital footprint?

We leave a digital footprint every time a financial transaction is made e.g. as a visa payment, a car purchase, even a post on social media. The data from you digital footprint is continuously gathered, monitored and analysed by HMRC. The digital footprint marks where we are, when we are away, what we do and what we spend our money on.

Stay with me and I’ll explain in more detail how HMRC tracks your digital footprint.

HMRC digital
footprint tracker: ‘Connect’.

Tracking digital footprints is a huge leap forward for HMRC as it no longer has to rely solely on information given by the tax payers.

HMRC draws on the electronic information via its super computer, ‘Connect’, designed to identify those paying too little tax. ‘Connect’ was launched in 2017 costing HMRC a cool £100 million to develop. HMRC considered the substantial financial investment worthwhile as every single year the Treasury loses billions of pounds from unpaid taxes.

Instead ‘Connect’ computer system is gathering information from a multitude of UK government and banking sources and at least 60 overseas territories.

HMRC tightening the net around tax cheats.

As more and more information is gathered HMRC is refining processes, learning more, increasing accuracy and building a highly accurate picture of the financial landscape of UK taxpayers.   Therefore, HMRC identifies tax anomalies and catch more tax cheats.

Connect’s importance to HMRC will continue to grow with the planned introduction of quarterly returns under Making Tax Digital.  Now Cross checking data will be carried out even faster.

Here are 9 examples of digital footprints HMRC crosschecks:

  1. Visa and Mastercard transactions: Anonymised information on all payments
  2. Land Registry records: To determine properties purchased, and stamp duty paid. HMRC can now identify if someone could realistically pay for the property and question if undisclosed income or savings used as part of purchase.
  3. DVLA: Details of cars purchased and owned by individuals
  4. UK and overseas bank accounts: Financial information is gathered from banks in more than 60 countries
  5. Internal tax documents: Systems show council tax paid, relevant VAT registration, previous tax investigations, last year’s tax return (or absence of one)
  6. Earnings: From any employer, including those you have worked for casually, or on an ad-hoc basis. This includes any company benefits received. HMRC also accesses child benefit and maintenance payments through the child support agency
  7. Online marketplaces: Websites such as Airbnb, eBay and Gumtree can be accessed to weed out regular traders
  8. Social media: The Connect system can also look at public social media account information, including from Twitter, Facebook and Instagram
  9. Web browsing and email records: Under the ‘Snoopers Charter’ HMRC will be able to access individual’s digital information

If you are in any doubt that crosschecking electronic footprint works read HMRC case studies. HMRC has had some quick wins found in the most unexpected places. An example was HMRC caught individuals spending thousands of pounds of undeclared income on lavish family weddings posted on Facebook.

Bruce Wilson
Bruce Wilson, Tax Expert

We are a full service accountancy firm specialising in making tax digital.

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Call: 0141 290 0262

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