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News - 30 May 2013

CONNECT: HMRC to use new technology to close the Tax Gap

Treasury minister David Gauke said that a high performing tax system needed to be supported by good systems to make collection, compliance, and enforcement easy so that taxpayers would believe it was being administered fairly and effectively. This would promote a “self-sustaining culture of compliance.”
“HMRC, like a business, needs to understand its customers to be successful,” he said.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“HMRC have applied behavioural economics to develop a more nuanced understanding of taxpayers, and has achieved up to 15% in increased payments for next to no cost in trials where it had refined the way it communicates its demands.”

But the real pay-offs came from deploying 21st century technology in the shape of CONNECT, a program that allows HMRC to cross-match vast amounts of data to separate taxpayers into categories according to their willingness to comply with the tax system. This segmentation doubled compliance revenue to nearly £14bn in 2010/11, during a period when expenditure on these activities had been cut by 20%.

Tonmoy Kumar continues:
“By linking data collected in different parts of the department, CONNECT can uncover previously hidden relationships between people and organisations. In the case of inheritance tax, the analytical software helped HMRC develop a single risk code based. Property ownership and transaction data, company ownerships, loans, bank accounts, employment history, and self assessment records relating to 300,000 paper returns were brought together in a new way to spot estates that were being falsely submitted as being below the £325,000 IHT threshold.”

HMRC interventions on these non-taxpaying estates reaped an additional £26m in tax, and other examples included preventing hundreds of millions of pounds in fraudulent VAT claims, and identifying offshore non-compliance worth some £50m.

CONNECT was also feeding into HMRC’s successful disclosure campaigns where professions such as medics, plumbers and private tutors were being targeted with offers to disclose unreported income. “Campaigns have brought in more than £510 million in voluntary compliance. And CONNECT has helped enable HMRC to recoup a further £120 million by finding and taking action against those who refused to engage,” Gauke said.

If you are unsure and need any help and advice on Self Assessment, Corporation Tax, VAT, Inheritance Tax, or you need to keep abreast of changes in legislation and how it could impinge upon your business, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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