HMRC Connect is a sophisticated software solution that has been in use since 2017. Its goal is to make the recovery of unpaid tax easier for HMRC. Historically it was very difficult to cross reference lots of data to try to find obvious cases where someone wasn’t declaring income. Recently though, Connect has become more powerful and integrated than ever, and that cross checking is completed in seconds.

What does HMRC Connect do?

It has three major functions:

1. Collects data from a wide range of sources
2. Analyses that data to identify risks
3. Stores the data for future reference

What data does it collect, and where from?

The data comes from a range of sources, including the following:

• Banks – information for over 60 countries
• The Land Registry – property transactions
• Visa and Mastercard Transactions –  information on all payments
• DVLA – vehicles owned or sold
• UK Tax documents – Council tax paid, VAT registration, last year’s tax return, any tax investigations
• Earnings – income from casual employers, company benefits, child benefit and maintenance payments
• Online platforms – Trading activity on platforms such as eBay, Gumtree etc
• Social media – all public posts on Facebook, Twitter and Instagram (only as part of an ongoing investigation)
• Web Browsing and email records – HMRC are allowed access to digital information

All of this information can be cross checked to the information included on a tax return in seconds. From there, HMRC will decide whether to open an enquiry and at what level.

What might they find?

There are obviously a huge number of permutations, but the type of thing HMRC Connect is looking for are:

• Taxpayers owning expensive vehicles where declared income levels don’t appear to support the purchase.
• Businesses receiving large amounts of income by credit card that isn’t declared.
• An overly high level of trade on eBay, suggesting your trading isn’t a hobby but a business.

How will an Enquiry start?

HMRC won’t declare what it knows, or what it may have found. Any initial contact is therefore likely to ask whether there may have been ‘an oversight’ in the preparation of the last Return. At this stage, it is vital that any missing information be identified and provided, as penalties and interest will be less. If HMRC feel that any omission has been intentional, the outcome will be far worse.

What if HMRC contacts me?

If you are a client, get in touch with us! You will automatically be a member of our complimentary Fee Protection Scheme, which  covers our fees for dealing with any Enquiry on your behalf. We will go back to HMRC for you, which often helps contain any enquiry and keep it brief. If a meeting is required, we can attend on your behalf, or be present during their visit.

The most important point is to ensure that you are entirely transparent in your dealings with HMRC and include all income in your Return, whether that is personal or business related. The days of HMRC being unable to tie together different sources of income have gone, and if you are not declaring all that you should, with HMRC Connect they will catch up to you!

If you have made a mistake with a tax return, please let us know. We can deal with that for you, before HMRC find it themselves.