Taxman's incredible technology tracks down tax dodgers

computer board

The taxman has spent the last seven years developing a computer programme called 'Connect', which has an extraordinary ability to spot tax dodgers. The system trawls databases of personal finance information, spots connections between people and businesses, and looks for mismatches with the information that taxpayers have given in their tax returns. The incredibly complex system has cost a reported £80 million so far, but since 2008 it has clawed back £3 billion extra in tax.

The computer program was revealed by accountants BDO in a new report. It said the programme searches 30 sources repeatedly to capture new information, check records against one another, and highlight potential areas for investigation. These sources range from public sector records like the DVLA to private businesses.

What does it know?

It means, for example, it can compare your bank account balance - and the money going in - with information from your tax return - or PAYE data submitted by your employer. It can also compare the amount you claim to have paid into your pension - and therefore declared tax relief on - with the amount actually paid into your pension. In addition, it can spot income from savings, and compare it to the savings income you declared on your tax return.
Clever data collection tools can also keep an eye on online auctions and marketplaces, to check whether you have an unusual amount of activity on the sites that could hint at undeclared income. It can also access records of things like the car you are driving, so it can ask questions of people who declare low levels of income and drive expensive luxury cars.

The idea is that if any of these things don't match up, HMRC can identify you as a target for further investigation. Already Connect is responsible for highlighting the vast majority of cases for investigation.

The report added that the programme is getting increasingly powerful, which means it can search further and faster. From September next year HMRC has access to files held by banks and financial firms in British overseas territories, and in 2017 it will get access to another 60 countries - which will all be included in searches by Connect.

Should you be worried?

Of course, powerful technology like this raises concerns that inaccuracies in underlying records could trigger tax investigations on completely innocent people. Then there are the security issues that always come with processing this level of data. There will be some people who despite having a completely clean tax record, still don't like the idea of their financial dealings being searched.

However, in an age where the government is squeezing every possible penny out of honest taxpayers, it's good to see government agencies are also working on solutions that will squeeze every penny out of those trying to cheat the tax system too. As a spokesperson told AOL: "Connect is an important tool in ensuring we maximise revenue. It brings together over a billion pieces of data which our analysts use to identify those who are determined to line their own pockets by cheating the UK of vital tax revenue."

But what do you think? Are you happy for the system to check your records, in order to track down tax dodgers, or does it leave you feeling a bit unsettled? Let us know in the comments.

Tax on AOL Money

Ten years of tax credit fraud and error costs £17 billion

Millions needlessly filing tax returns

Annual tax bill for pensioners would be enough to buy a car

Ten terrible tax excuses
See Gallery
Taxman's incredible technology tracks down tax dodgers

HMRC has revealed the 10 worst excuses people have given for missing the 31 January tax return deadline. The excuses were all used in unsuccessful appeals against penalties for late filling and payment.

Top of the list was “My pet dog ate my tax return…and all the reminders.” It's the school homework classic that never gets old.

One taxpayer argued “I was up a mountain in Wales, and couldn’t find a postbox or get an internet signal.”

It’s not thought that he was up the mountain for the entire ten months - which would indicate a particularly slow ascent.

One person tried to get away without penalties by claiming “I fell in with the wrong crowd.”

Presumably this was some sort of anti-tax, paperwork-eschewing crowd, who ought to take full blame for the fact that you couldn't be bothered to fill in your form.

One of the most fanciful excuses was “I’ve been travelling the world, trying to escape from a foreign intelligence agency.”

It’s an impressive level of excuse, although it might make quite a dull episode of Spooks.

One person tried to claim “Barack Obama is in charge of my finances.”

It would clearly explain why the tax return was late, because Obama has probably been a bit busy recently.

In an excuse which seems to have come directly from ‘My Family and Other Animals’, one taxpayer said: “I’ve been busy looking after a flock of escaped parrots and some fox cubs.”
This taxpayer didn’t bother altering the excuse they usually use at work for missing deadlines and claimed: “A work colleague borrowed my tax return to photocopy it, and didn’t give it back.”

One taxpayer argued “I live in a camper van in a supermarket car park.”

While that could make online submission a bit tricky, it doesn’t fully explain why they weren’t able to complete a paper return or leave the van to find somewhere more suited to paperwork completion. Perhaps the supermarket cafe would have sufficed.

If in doubt, point the finger at your other half.

One person used the brilliant excuse that “My girlfriend’s pregnant”: presumably they weren't to blame for that either.

One person blamed the fact they had been in Australia - where computers and the internet presumably haven’t been invented yet.

David Cameron: A "Believer in Low Taxes"
Read Full Story