Will HMRC find out if I have undeclared income?
Eventually, yes. HMRC now don’t solely rely on information submitted on tax returns — in 2010 it rolled out its ‘Connect’ computer system developed by BAE Systems Applied Intelligence which draws information from British Overseas Territories and known tax havens, as well as over 60 other countries (known as the “common reporting standard” rules). Not only this, but Connect cross-references information from UK government databases such as DVLA, Land Registry and local councils and even accesses insurance databases, credit reference agencies, online property adverts and eBay auction pages to obtain intelligence and discover undeclared income. One of the most powerful arms of Connect casting an eye over all Visa and MasterCard payment transactions.
This means that the work that once may have taken HMRC weeks or even months to trawl through can now be completed by a computer using algorithms in a matter of seconds. For example, if an individual owns an expensive car but doesn’t have the declared income to purchase and support the ownership of such a car, Connect can discover this and HMRC can decide whether an investigation should take place and of what magnitude.
Connect aside, social media provides HMRC with an abundance of information, and inspectors will even manually trawl online profiles to look for evidence of a lifestyle which doesn’t equate to declared income.