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Do you need to make a tax disclosure?

Jonathan Green

HMRC has a new £100m weapon to help identify individuals who may not be declaring all of their income and, therefore, paying too little tax.  

“Connect”, the Government’s new supercomputer, uses information from a range of government and web sources to create a profile of a taxpayer’s total income, rather than relying only on the information provided by the individual via their tax return and received from third parties.

When the information differs, the account is flagged and could be the subject of an investigation by HM Revenue & Customs (HMRC), potentially resulting in additional tax, often covering several years, together with interest and penalties.

How does connect work?

Using rental properties and income as an example.

‘Connect’ can check estate agents’ websites and search for current properties available to let. 

Once it has a data pool of rental properties, the system can find the owner(s) of each property using data available from the land registry.

Using this married data, ‘Connect’ can cross-examine the information with HMRC records to check the owner of the property has declared the rental income in their tax return and, if appropriate, paid the correct amount of tax.

If HMRC believe there to be a discrepancy, up to now, they have issued a letter to the individual explaining they believe them to be a landlord and inviting them to make a full disclosure.  This approach may become stronger in future. 

It is estimated that the ‘Connect’ super computer now generates 80% of HMRC’s tax investigations; therefore, it is vital for you to declare all income now, if you do not already.

Investment in the new system comes as part of the Government’s well publicised crackdown on tax evasion.

What information can ‘Connect’ collect? 

‘Connect’ is not just limited to searching estate agents’ websites. 
It has access to:
-    Earnings (including casual and ad-hoc work)
-    DVLA
-    Anonymised Visa & MasterCard transactions
-    Land Registry
-    Social media profiles
-    Tax (including council tax)
-    UK and overseas accounts
-    Online marketplaces
-    Web browsing and email records

The system is powerful enough to use the data it collects to create a profile and analyse the likelihood of whether or not an individual can afford their car(s), house(s), holiday(s) and other assets, based on their declared income.

If there is a discrepancy and HMRC suspect undeclared income and unpaid tax, an investigation could be launched. 

How can Moore help you? 

The penalty for not disclosing all income can be up to 100% of the tax owed (or 200% if the case involves overseas income).  This is in addition to the interest charged for late payment of the tax.

Our tax team has extensive experience in handling such cases, in dealing with disclosures and achieving significantly reduced penalties on behalf of tax payers.

If you have received a letter from HMRC suggesting you have undeclared income, or you wish to make a disclosure, and you would like us to review your case, please get in touch with your local Moore office today.