Tax evasion has been a hot topic in the news for the last year and HMRC have been naming and shaming their top scalps. Multinational and multi-billion pound income corporations such as Starbucks, Amazon and Google have all avoided tax liabilities by siphoning profits through offshore accounts. And although these tactics are legal in a tax loophole, HM Revenue & Customs have the tools to identify tax evaders.
If you don´t think Big Brother is watching you following the Edward Snowden/NSA drama, think again. HMRC has a powerful weapon that can tap into your invisible network of friends and acquaintances to identify cases of fraud. Designed by the defence contractor BAE, the system known as “Connect” is used by 3000 analysts and uses a mathematical equation to plough through hidden data and seemingly unrelated data. The data is transferred to an investigators screen at HMRC where it makes a maze of web like patterns. When people are hiding information and the patterns make a different shape to the information HMRC take from visible data. Connect delivered £1.4bn of additional revenues in its first year!
Since the government extended the powers of the tax agency, HMRC inspectors can turn up at your business premises unannounced and demand to see your accounts, inventory sheets and bank account records. Using methods akin to the Stasi in post-war Germany, tax inspectors even go undercover scouting for information or posing as customers to see if the purchase is accounted for. Their targets using this method are businesses that deal with small value cash transactions such as restaurants, hair dressers and shops. And if you didn´t think that was fascist enough, the tax agency pay outside informers to earwig on people´s conversations and report anything they find suspicious or incriminating. You can´t trust anybody these days!
Third party information
Under the Freedom of Information Act, HMRC has the authority to request and access private information about individuals and businesses they are investigating for fraud. This includes personal information from government bodies, governing institutions, the Land Registry, DVLA and your bank – especially your bank! Minor indiscretions in a person´s behavior or belongings that do not weigh up with the declaration of income flags up a potential warning which will result in a visit from the tax man or even a raid on your property.
Local and online information
Another source of information the tax agency uses to determine whether a lifestyle is out of sorts with a declared income is social media networks like Facebook and Google+ together with adverts in newsagents, local papers and email. Yes, they can see your email! So be careful what you say and be mindful of the photos you post on Facebook!
Fear and guilt
HMRC prey on the fear and guilt of tax payers using advertising campaigns that show how they are closing the net and the harsh punishments they will dish out if you are found to be avoiding taxes. For example, a minimum £100 fine is payable if you make a mistake on your self assessment tax form or file it late. Last year HMRC secured 400 convictions.
To make sure you stay on the right side of HMRC seek professional help from Taxaccolega, a low fixed fee accountant in London, and ensure your accounts are in order, up to date and that you are only claiming tax breaks you are entitled to.