HMRC Using AI to Spot Tax Evasion via Social Media

HMRC has started using artificial intelligence to identify potential tax evasion, with a particular focus on small business owners and the self-employed. The system analyses social media posts to check for signs of lavish spending, things like images of luxury cars, extravagant holidays, or expensive lifestyles that may not match up with reported taxable income.

When the technology spots a mismatch, it flags the account for review by a human investigator, rather than taking any automatic action.

This use of AI reflects HMRC’s efforts to keep pace with the increasing amount of business conducted digitally, where traditional paper trails are more limited. There have been concerns raised over privacy and innocent people being wrongly flagged, but HMRC has confirmed that every alert will still be assessed by a person before any compliance steps are taken.

What’s the Key Takeaway?

For small businesses, the primary point is that digital footprints are now more important than ever, and HMRC’s compliance processes are evolving in line with how people live and work today.

For advisers and business owners, it underlines the need to ensure public posts reflect declared incomes and that accounts and records remain up to date.

This new approach by HMRC may also have a wider impact on social media habits among business owners. Over time, and depending on the rate of enquiries, the knowledge that HMRC is monitoring posts for signs of exaggerated lifestyles could lead to fewer people sharing images that present an unrealistic view of their wealth or success.

As compliance checks become more sophisticated, it’s possible that those in business may be more cautious about what they share publicly, knowing that such posts may invite further questions from HMRC. We shall see!

As mentioned elsewhere, if you’re a client of ours and receive any contact from HMRC, please refer them to us. We include all clients in our Fee Protection Scheme as routine, so our time costs are covered in dealing with them on your behalf.