Throughout 2020 we have seen a stark rise in the number of tax enquiries our clients are receiving from HMRC. This is in the main part because of the intelligence of their core system called connect.
What is HMRC’s Connect Computer System (CCS)?
Introduced in 2010 and having cost in the region of £100m to develop, the CCS is a sophisticated computer software and the key data analysing tool used by HMRC in its efforts to reduce the tax gap. Having recovered more than £3bn in taxes since its launch, the CCS allows the HMRC the ability to identify those who are understating and underpaying their tax liability. As they no longer solely rely on the information included in tax returns, they can now get a bigger picture of taxpayer’s expenditures by drawing on a huge amount of information the Connect System can collect for them.
The CCS is split into two distinct parts, Analytical compliance environment (ACE) and Integrated compliance environment (ICE). ACE is an analytical environment that allows a small number of specialist analysts to manipulate, analyse and profile data. Tax credit data is placed into the ACE environment to match live claims against HMRC and third-party data, enabling identification of undeclared partners, directors, foster carers, landlords, claimants living abroad and those with private bank accounts, indicating potential undeclared wealth.
Whereas ICE is a visualisation tool that presents linked data, shown pictorially on screen, with the results used to enable further targeted risk assessment. Ran by around 3,000 staff across HMRC, ICE allows users to identify organised attacks.
Connect is run by a team of HMRC specialists in the risk and intelligence service (RIS) and HMRC says that it is using the software to direct resources more effectively, increasing efficiency and improving ‘customer experience’ by improving case selection, quality and strike rate across the compliance spectrum from organised criminal attack to the identification of common errors.
What can the Connect Computer System (CCS) tell the HMRC?
Dubbed the ‘snooper computer’ the CCS helps HMRC to gather information from banks, peer-to-peer lenders and even platforms like social media accounts to build an accurate picture of an individual’s spending. It also has the power to access Land Registry records to see whether any properties have been purchased and determine whether a taxpayer is likely to be able to afford such properties. And that’s just the tip of the iceberg, records that can be accessed include:
- Tax returns (including VAT, PAYE, income tax and corporation tax returns).
- Bank accounts and pensions.
- Online social networking such as Facebook and Instagram.
- Credit reference agencies.
- Amazon, eBay, Gumtree and similar sales websites.
- Credit and debit card accounts.
- Online payment providers such as PayPal.
- Travel information including flights and insurance
- Government agencies such as Companies House, the Land Registry and the Border Agency.
- Foreign tax jurisdictions (including treaties and automatic exchange agreements) and the common reporting standard.
- Property websites such as Zoopla and Rightmove.
- Google Street View.
- Council tax records.
- DVLA records.
- DWP records.
- Electoral roll.
- Insurance companies.
- Charities Commission.
HMRC can now charge a penalty of up to 110% of the outstanding tax for non-disclosure. Therefore, we urge all individuals who have a UK vested interest, be it property or others to bring their tax affairs up to date and comply with their annual filing responsibilities.
Take advantage of one of our free tax consultations by contacting one of our consultants here