Technology means the tax man knows more about you and your money than ever before – and the result is targeted tax fraud inquiries have raised £610 million in three years.
HM Revenue & Customs is reaping the rewards from an £80 million investment in data intelligence systems and signing up to the international Common Reporting Standard (CRS).
Freedom of information data obtain by tax advisers Saffrey Champness shows 2,400 fraud investigations were started between April 2016 and April 2019.
Many were based on analysing data provided through the HMRC Connect system, which crunches information from more than 30 sources, including the internet, banks, letting agents, finance companies and councils.
Others took in data from CRS, a network of tax authorities exchanging information about offshore savers and investors.
Connect zooms in on tax fraudsters
The figures revealed 1,473 criminal investigations yielded £348 million, with 41% of cases ending with financial penalties.
Another 924 civil tax avoidance cases raised £262 million as 28% closed with a penalty.
The data also shows HMRC is targeting alleged offenders more precisely.
The number of investigations opened each year has dropped, while the number attracting penalties has increased from one in three to more than half (53%).
Zena Hanks, a partner at the consultancy, said: “We have seen HMRC take an increasingly hard line on suspected avoidance in recent years. The kinds of avoidance schemes that many people imagine have long been consigned to the history books are still under HMRC scrutiny. Most taxpayers just want to get things right.
Tools for tackling tax evasion
“HMRC’s pool of intelligence is growing, as are the legal tools at its disposal – with the Connect System and the Common Reporting Standard the tax man knows far more than ever before. HMRC therefore feels ever more empowered to target taxpayers where they think fraud may have been committed.
“HMRC will also be learning as they go, gathering more information and testing new powers through the courts and will continue to strengthen their resources for tackling tax evasion. The quicker mistakes are corrected the better the opportunity to resolve the mistake and minimise the penalties that HMRC can levy.“