If HMRC discovers that you have not declared income on which tax is payable, you may be required to pay interest and financial penalties in addition to the unpaid tax. In some cases, you may even face prosecution. However, to pursue you for unpaid tax, HMRC needs to know that you have failed to declare all your income. This raises the question, ‘How do HMRC know about undeclared income?’
HMRC gleans information about taxpayers’ income from various sources. Here, we discuss a few of these sources to give you an idea of HMRC’s capabilities in countering tax evasion, which are significant. If you have failed to declare all your income to HMRC or are concerned that you may have made errors in your tax returns, our specialist HMRC solicitors and barristers are on hand to help. We will review the circumstances giving rise to your undeclared income and devise a strategy to resolve the situation and secure the most lenient penalty possible.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
Just some of the key ways in which HMRC knows about Undeclared Income are as follows:
- Connect
Connect is a super powerful computer programme at the heart of HMRC’s counter-evasion efforts. The system reportedly holds billions of data about taxpayers’ affairs, which it compares with their tax returns to identify any discrepancies. If any issues come to light, HMRC may open an investigation.
HMRC does not make public the sources from which it gathers the information to feed into Connect. However, it is likely to include the following:
- Bank accounts.
- Savings and investments.
- Pension pots.
- Land registry records.
- Credit card payments.
- DVLA records.
- PAYE records.
- Social media, to put together a picture of your lifestyle and confirm it accords with the income you have declared.
- Apps and platforms such as Amazon and Airbnb, to establish whether the taxpayer has any additional sources of income that have not been declared.
- Informants
The perceived injustice of having to pay taxes when others aren’t can be a strong incentive for individuals to report others to HMRC. HMRC makes it incredibly easy for someone to report an individual they suspect of tax avoidance or evasion. The informant simply completes an online form, which they can do anonymously if they wish, and HMRC does the rest.
- Social media
The apparent abandonment with which many people post details of their lives online can cause an array of issues, not least in connection with undeclared income. A number of high-profile cases involve individuals facing tax investigations after HMRC officers noticed that the lifestyles depicted online were at odds with those indicated by their tax returns.
What does HMRC do if they identify Undeclared Income?
HMRC takes all instances of tax evasion and avoidance incredibly seriously, hence its far-reaching efforts to confirm that taxpayers’ returns reflect their lifestyles. However, its primary concern is recovering unpaid tax, and, to that end, it favours civil proceedings over criminal ones.
If HMRC discovers that you have failed to declare all your income, you will likely face an HMRC investigation, at the conclusion of which you will be required to pay all the tax found to be owing, together with interest. Sometimes, HMRC may add a penalty to the sums due, which can be as much as 200% of the tax you owe.
In severe cases, HMRC may pursue a criminal prosecution. If convicted, you may face unlimited fines and period of imprisonment.
How we can help if you have Undeclared Income
At Altion Law, we have a team of solicitors and barristers who specialise in assisting clients with matters involving HMRC and Border Force. Accordingly, we are ideally placed to assist you if you have received notification from HMRC that it has evidence that you have underpaid tax, or if you are concerned that you have not declared your income correctly.
Generally speaking, the sooner you report the issue to HMRC, the more likely you are to receive a lenient penalty. However, before doing so, it’s vital to ensure your affairs are accurate and up to date. We will review the relevant documentation and advise you on your tax liabilities. We will make contact with HMRC on your behalf and liaise with its officers throughout any ensuing investigation. Using our decades of experience with HMRC and its practices and procedures, we will negotiate a settlement on the most favourable terms possible.
We understand that HMRC matters can place significant stress on our clients, so we will support and guide you through the matter, offering straightforward advice and protecting your interests every step of the way.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
