A top secret HM Revenue & Customs (HMRC) computer system is revealing hidden financial information about expats and their money.
Thousands of expats live abroad but still keep property, bank accounts and sometimes claim benefits in the UK while failing to declare any earnings from their assets on tax returns.
Now the long-arm of the tax man is aided by sophisticated technology that identifies and builds a financial profile of suspected tax avoiders.
CONNECT is a software system that can piece together a full picture of expat finances from billions of fragments of information collected from official and commercial databases, the internet and social media.
Where the information comes from
HMRC has 150 data analysts looking for anomalies between income reported on tax returns and information held about expat finances.
CONNECT trawls dozens of databases to find out who may be avoiding their tax, for example:
- Passport and visa information collected at borders shows who has left the country, while Land Registry home ownership records show taxpayers who own one or more properties. Investigators are looking for undeclared rental profits or sales proceeds based on this information
- Councils and benefits agencies report claims for housing allowance, unemployment benefits and other benefits. Comparing housing allowance claims to electoral rolls and Land Registry records shows if a property is rented out
- Lifestyle evidence comes from places such as the DVLA, Facebook, Twitter, bank and credit card account records. Investigators are looking for evidence of taxpayer living beyond their means.
- Mortgage lenders provide buy to let borrowing data and letting agents make an annual return of all landlord clients, the properties they rent out and rents received
- Overseas land registries and banks feed offshore financial information into the CONNECT system about expats, while European Union tax authorities offer tax return figures.
- Informers were paid £320,000 in 2011-12, the last year figures are available for
Cracking down on tax avoidance
If CONNECT finds a suspicious profile relating to a business sector, HMRC invites voluntary disclosures, like the Let Property Campaign currently running for landlords who have not paid tax on rental profits,
Sometimes individual taxpayers are asked to check their tax returns are correct.
A study by tax consultants BDO found 62% of tax investigations are started by CONNECT which has so far raised £3 billion in unpaid tax out of a targetted £22 billion expected by the end of 2015.
