What data does HMRC use to investigate your business and personal finances?

So, what data does HMRC hold on your business and personal finances? The answer, a lot. 

This Is Money recently reported there are now 55 billion items of data relating to taxpayers in its 'Connect' system. HMRC’s ‘Connect’ system is an artificial intelligence system which pulls in data from a vast number of sources to help HMRC identify tax evasion.  

‘Connect’ is really a vast web of data bases which HMRC is constantly looking to expand, and the tax authority pulls significant amounts of data from non-tax related systems.  

For example, as the new Renters (Reform) Bill makes its way through Parliament, it is anticipated that a database will be created of new and prospective landlords in the private sector. All landlords will be required to register themselves and their properties on this new Private Rented Sector Database. Once in place, this will be a further data base HMRC can cross check with submitted tax returns to confirm all landlords are registered for tax.  

Of course, this will be just one of many data sources HMRC can use to compare with submitted tax returns. Not many of us realise that when we publicly post photos of holidays, home improvements and luxury purchases and treats, we may find HMRC comparing these posts with the income declared in our tax returns.  

Every year, thousands of individuals and businesses are investigated by HMRC and while some of these will be prompted by HMRC surveillance, it should be noted that some investigations are randomly initiated. 

HMRC investigations can be very upsetting, stressful and there may be nothing wrong with your affairs where you are selected for a random investigation.   

If you are selected for an HMRC investigation, it is most important to remain calm. At this point, HMRC will either suspect you may have avoided tax, or the enquiry could be completely random with no suspicion of wrongdoing. You may feel you have the expertise to deal with the investigation yourself, but you should consider seeking urgent professional advice from an accountant to ensure an early resolution.  

At TaxAssist Accountants, we will also have access to an expert in tax investigations should the enquiry be more complex and look as it will be a long and drawn-out investigation.  

This provides peace of mind that the investigation will be dealt with on your behalf, limiting the concern and stress of spiralling additional fees. 

If you wish to learn more about our services, you can arrange a free initial consultation with us today on 01636 402 425 Alternatively, you can use our online contact form to outline your position as a self-employed sole trader or small business and we’ll do the rest. 

Date published 13 Jul 2023 | Last updated 20 Mar 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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