HM Revenue & Customs is to sift through credit card spending records in the hunt for tax dodgers.
The significance of a minor piece of legislation published as part of the draft Finance Act 2014 was revealed in passing in supporting documents to Chancellor George Osborne’s Budget 2013.
The document No Safe Havens is a HMRC report on strategy to uncover offshore tax cheats.
The document details how HMRC investigators intend to profile suspected tax avoiders from their lifestyles.
Part of this profile will include combining bank account, savings and property ownership to assess whether someone has spending patterns beyond their income level.
Fair share
Key to this analysis is the HMRC CONNECT computer system that the report says holds billions of pieces of data on taxpayers – the report boasts the system holds more data than the British Library.
The new law will require credit card companies to pass monthly account totals of money paid to merchants to HMRC.
The aim is to catch business people who do not fully declare their income.
“The government is delivering for the honest majority by flushing out these tax evaders and ensuring that everyone pays their fair share,” said David Gauke, Exchequer Secretary to the Treasury.
“Central to this offshore evasion strategy is greater sharing of information between governments. Last year, we signed an enhanced automatic exchange agreement with the USA, the first of its kind anywhere in the world. In February we reached an agreement with the Isle of Man and I welcome the lead they have taken.
Jersey joins Son of FATCA
We now have similar agreements with both Guernsey and Jersey, demonstrating the commitment of all the Crown Dependencies to transparency and to tackling tax evasion. We will be looking to conclude similar agreements with other jurisdictions.”
The report offers several case studies to underline how HMRC’s tax investigators work, including how some tax evaders are pursued after they have died.
Mr F was a long-time tax evader, says HMRC, .and with help from an overseas lawyer, he had a network of offshore trusts and companies to shelter both business and private assets and to move money between countries.
“He had reason to be confident in the security of these arrangements, as their complexity had effectively hidden his identity and he had never contributed UK taxes<” explained HMRC.
“However, when Mr F died, the beneficiaries and executors of the estate needed HMRC clearance to get Grant of Probate. HMRC investigations, using HMRC’s sophisticated risk tools such as CONNECT, uncovered a highly-sophisticated fraud perpetrated over a prolonged period of time. A recovery of more than £10 million was secured from the estate.”
