Departmental report reveals use of technology and data to help identify possible shortfalls
HM Revenue and Customs is using “digital prompts” to help identify – and warn – wealthy individuals that may not be paying enough tax.
A newly published corporate report provides details of the department’s efforts to ensure it collects the right amount of tax from wealthy people – encompassing those who, at any point in the previous three years, have had an annual income in excess of £200,000, or assets of more than £2m.
There are about 800,000 such people in the UK. Their tax affairs are overseen by a dedicated unit, as the department said that “wealthy individuals may present a higher risk of error than other customers as the amounts involved are greater [and] also because they may have investments in more than one country, making their financial affairs more complex”.
The report added: “To secure compliance from wealthy customers, HMRC has a specific team that applies a proactive and co-operative approach, taking into account the unique nature of this customer group’s tax affairs.”
The “data-led” work of this team includes nominated compliance managers using technology and analysis to “develop an in-depth understanding of the finances, behaviours and compliance risks of wealthy individuals”.
The intention is to enable remediation to take place before a tax return is officially filed, avoiding the need for enforcement action or punishment.
To support this, an automated system provides compliance managers with alerts if a possible issue is detected.
“Digital prompts are used to flag when a customer’s entry on the online Self-Assessment system is out of line with what we expect to see,” HMRC said.
The overall aim of the team and its work is to “offer support where needed, such as around life events, legislation changes or complex transactions – but take action against the minority who fail to file or incorrectly file tax returns”.
The report said: “It’s everyone’s responsibility to get their own tax right, but we can prevent non-compliance before it happens by educating and supporting wealthy customers while continuing to respond to the minority we identify as non-compliant. To help wealthy customers get it right first time, and to remove opportunities and incentives for error, we undertake activity before a tax return is submitted. We base our activity on the known risks within the wealthy customer group and when appropriate deliver a common educational message to the individuals we believe will benefit most.”