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HMRC’s ‘snooper’ methods

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4 minute read.

Reducing the ‘tax gap’ is at the heart of HMRC’s strategy towards full digitalisation. The ‘tax gap’ is the difference between the amount of tax that should be paid and what is actually paid. According to HMRC’s Official Statistics Release of June 2018 the ‘tax gap’ is estimated at £55bn which is 5.7% of the total current tax take, equivalent to half of the annual defence budget.

Approximately 10% of this is estimated as being lost via tax evasion. Although HMRC stress that any taxpayer could be the subject to an enquiry, the reality is that enquiries are either based on computer generated ‘behavioural technology’ risk-based selections or as a result of information received from sources.

Big data

HMRC has one of the most sophisticated computer systems in the world, with their analytics team winning the award for the Best Big Data Project at the 2017 UK IT Industry Awards for its ‘Connect’ project. ‘Connect’ looks at data using a mathematical technique known as ‘social network analysis’ which ploughs through disparate, previously unrelated information to detect otherwise invisible networks of relationships. Other digital technology used includes web-trawling software as well as social media search tools. However, there is still a place in HMRC’s investigation world for good, old-fashioned, investigatory skills – it is not unknown for undercover investigators to have lunch in a restaurant suspected of hiding small value cash transactions.

Most holiday or short terms lets and parking spaces to rent are all invariably advertised on the internet. Landlord licensing schemes are popping up all over the country as local authorities attempt to crack down on rogue operators. HMRC have use of these council databases and would welcome licensing for all landlords to make their search for landlords who do not declare that much easier.


Tip-offs are still a vital source of information and tend to generate the biggest returns. HMRC has a hotline enabling the public to report evasion and tax fraud direct to which 40,695 calls were made in 2017/18. As an incentive to expose, HMRC offers rewards to those who provide information about suspected tax evasion and confirm that last year £343,500 was paid. In addition, every three months HMRC publishes a ‘name and shame’ list of taxpayers who evade more than £25,000 in tax.

With far more information available than ever before HMRC is able to target investigations on a more efficient and cost-effective basis. But the department is not being complacent – it is intent on extending its data gathering powers. A recent consultation on HMRC’s civil information powers proposed that HMRC should be able to seek information from third parties without the agreement of the taxpayer or a tax tribunal, with no right of appeal. The change proposed is essentially to bring HMRC’s powers in line with those of tax authorities in the rest of the G20 group of countries and although the number of taxpayers affected by these proposals will be relatively small the fact the taxpayer will not be consulted is a worrying point.

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