The new software, called ‘the connect system’ allows HMRC to ensure that data collected by one part of the department can be used across all of its compliance areas, he said.
“It means new relationships can quickly and easily be uncovered between people and organisations that would otherwise remain hidden, so that fraud can be detected and stopped in a way that was simply not possible before".
He went on to give an example where a much more systematic and targeted approach to inheritance tax has yielded good results.
“HMRC receives around 300,000 paper returns on bequeathed estates every year – including around 200,000 from estates claiming to be below the tax-paying threshold. Due to the very large number of returns received, it was very difficult to identify high risk cases where more tax was due than what was in fact declared.
To develop a more thorough and efficient means of enforcing compliance, HMRC experts developed a single risk code that sifts over 50 million lines of data to spot where estates might have been falsely submitted as exempt.
HMRC utilised the massive amount of information it held on property ownership and transactions, company ownerships, loans, bank accounts, employment history, and self assessment records that had previously been unmanageable. All of this was turned into a single code that indicated when the return was likely to be inaccurate and why.
The results were impressive – HMRC interventions on non-taxpaying estates increased many times over; and in the first year of operation, an additional £26 million was raised from Inheritance Tax through the use of Connect.”
Gauke said there were plenty more examples and he highlighted how this would prevent hundreds of millions of pounds in fraudulent VAT claims, and enable identification of offshore non-compliance to yield over £50m that will continue to increase further as enquiries are settled.
Overall, through making better use of the data HMRC has, connect has already generated around £1.4bn in additional tax yield.
To read the full speech, click here.
