In written evidence submitted to the Public Accounts Committee recently, HMRC provided an interesting insight into Connect. Connect is the name of HMRC’s risk assessment computer programme that collects, integrates and analyses all of the third party data the taxman receives, which then allows tax staff to identify potential tax evaders and avoiders for investigation.
Since Connect was launched in 2010, it has helped generate more than £3bn in additional revenue and now delivers 95% of cases for the operational compliance teams. In 2015/16 this amounted to approximately 1m cases.
New data sets received from the Land Registry and Merchant Acquirers has helped double the size of Connect in recent years. Merchant Acquirers process credit and debit card transactions and report transactional data to HMRC.
Despite the fact Connect now holds more than 22bn lines of data, it is powerful too.
In one month Connect analysed more than 800m Merchant Acquirer transactions representing about £40bn in credit and debit card spending. In one significant case a large restaurant was found to have declared sales that did not match the expected level of cash, credit and debit card transactions, pointing towards large scale evasion. After an enquiry led by one of HMRC’s fraud teams, this case is heading towards a tax settlement in excess of £4m.
The use of Connect in identifying hidden economy cases using the Merchant Acquirers data has increased the strike rate by 20% and increased the yield per case by more than £2,000.
Author: Guy Smith, Tax Investigations Manager