Big Brother is watching or how HMRC can tell if you are avoiding tax

Maybe it’s just the flip side of austerity economics, but there can be no doubt that public tolerance of tax avoidance is at an historic low. HMRC has come under pressure from the government to get tough on the huge sums lost to tax avoidance and the 'black economy' and tax avoidance has become big news.

The success of HMRC against schemes such as Ingenious and the media “frenzy” surrounding Rangers EBT case ("the big tax case") has taken tax avoidance out of the financial press and put it into the tabloids. Celebrities like Gary Lineker, who was a member of the Ingenious scheme, now tweet that they have 'coughed up years ago', that they have 'paid all their tax', arguably to avoid reputational damage, such is the public distaste for tax avoidance. And the impact of the Supreme Court decision in the 'big tax case' will be felt in a number of boardrooms, not just football clubs.

But, HMRC have not just got tough, they've also got smart on catching up with tax avoidance. 

Here are just 5 of the ways HMRC can tell whether you are paying your tax:

1) The Spider’s Web

HMRC’s counter avoidance team launched a powerful computer program, “Connect”, in 2010 which is capable of sifting a huge quantity of information, searching for individuals who have underpaid or not paid tax. It sorts data and provides analysis from a number of sources including (but not limited to) credit card usage, bank interest and the Land Register. Along with extended data gathering powers which allow HMRC to access information about on line traders (ebay and Amazon for example), the Revenue can now build a graphic representation of an individual's financial transactions into a complex 'Spider’s web', identifying links which would previously have taken years to find. 

Big brother IS watching you.

2) International Assistance and leaks

Following the global crackdown on tax evasion, there are fewer offshore hideouts for a tax avoider and an increased risk of 'leaks'. The Panama Papers was perhaps the most recent example of whistleblowing, naming and shaming not just the individuals who seek to put their assets beyond the jurisdiction of their government but also the professionals who assist them.

Governments are also working together - tax avoidance is not just a British problem. From the last quarter of 2017, details of bank interest, dividends and other financial information about expats will be forwarded to an individual’s home government. This in turn will mean that an individual wishing to avoid paying tax, will have fewer places to hide. 

Co-operation across Europe is tightening too thanks to The Mutual Assistance in the Recovery of Debt (MARD) (EU States) agreement. Further information can be found at www.gov.uk

3) Social Media

Facebook, Twitter and Instagram (to name but a few) provide HMRC investigating teams with the “pictures” they require to evidence a lifestyle that does not go hand-in-hand with the individual’s tax return. HMRC are also known to review websites such as ebay, Gumtree, Amazon and AirBnB. So whether you are a private trader, selling your prized CD collection or renting your spare room please note that HMRC may be watching.

4) Suspicious Activity Reports ('SARs')

Banks and professional advisors (including tax advisers, accountants and lawyers) are obliged to report any ‘suspicious activity’ to the relevant enforcement agencies in a report known as a SAR. Importantly, they are prohibited from telling you that they've done so. And all of the information from SARs can be fed in to the HMRC Connect program. 

5) Fear

HMRC have long tried to persuade people to come forward, whether it be by offering reduced penalties or the confirmation of no prosecution. However, with a number of high profile wins under their belt, the days of coming to an amicable agreement are potentially gone and HMRC is coming down hard on evaders. HMRC is threatening tougher penalties and more prosecutions and with the fear of “naming and shaming” more and more evaders are holding their hands up now, in order to avoid harsh penalties.

HMRC Aggressive Tax Planning Claims Lawyers UK

At mlm we understand that facing up to financial challenges, such as tax issues can be very stressful. We also understand that you may unwittingly find yourself on the wrong side of HMRC as a result of inadequately explained investment advice. You should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to resolve your situation. Should you have received a demand from HMRC in relation to tax matters, please do not hesitate to contact me directly on 0141 228 1329, email: bmochan@mlmsolutions.co.uk or alternatively complete our online enquiry form.

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