55 billion items of taxpayer data now on HMRC’s ‘Connect’ AI system, reveals tax authority

HMRC’s machine learning system now plays central role in identifying tax investigation targets.

HMRC has revealed that there are now 55 billion items of data relating to taxpayers in its ‘Connect’ AI system, which it uses to target taxpayers for tax investigations.

HMRC’s ‘Connect’ is an AI system that uses data from a wide range of sources to identify potential cases of tax evasion and avoidance. It is used by HMRC to select individuals and businesses for further tax investigations. The database has now grown to 6100 gigabytes of taxpayer data.

Connect allows HMRC to quickly analyse information that would previously have required a huge amount of time and human resources.

Examples of what Connect can do:

• Cross-check property ownership data from the Land Registry, client lists from estate agents and online property rental ads against tax returns. This will reveal a list of buy-to-let landlords who might be underpaying tax on their rental income
• Cross check overseas bank accounts and investment accounts against tax returns which will identify taxpayers who might be under declaring investment income or capital gains

The system gets data from numerous sources, including:

• Web browsing and email records
• Social media
• Flight sales and passenger information
• DVLA records
• E-retail platforms
• Individual and corporate tax returns
• The Land Registry
• Online property rental platforms
• UK Border Agency
• Bank and credit card records

The development of the system was driven by HMRC’s determination to close the ‘tax gap’ – the difference between the amount of tax that should be paid to HMRC in theory and the amount of tax that HMRC actually receives. Last year the tax gap stood at £32 billion.

Connect is now at the core of HMRC’s tax investigations. It allows HMRC to analyse billions of data points to pinpoint taxpayers for closer scrutiny. It’s an incredibly complex and intelligent computer system. However, the system can easily produce ‘false positives’ and trigger investigations into innocent individuals and businesses.

Due to the ‘automatic’ nature of the Connect system, innocent taxpayers can end up under investigation through no fault of their own.

Tax investigations can be very stressful and costly for those involved which is why we run a Tax Investigation Service to help protect clients against the professional costs involved in a tax investigation or enquiry. This service is backed by an insurance policy we have taken out in our own name.

Joining our Tax Investigation Service provides peace of mind knowing we are here to help you when HMRC come calling. Our service will pay our professional fees that result from most types of HMRC enquiries or full investigation.

For more information or to subscribe, speak to your usual Kreston Reeves contact or email taxinvestigationservice@krestonreeves.com