HMRC is increasingly using big data and AI to gather evidence for its tax investigations, which reduces the need for the organisation to carry out property raids. According to law firm Pinsent Masons, the number of property raids carried out by HMRC has dropped by 30%. In 2016/17, HMRC carried out 669 property raids, as compared to just 471 last year.
Pinsent Masons said that HMRC is leveraging big data sources and sophisticated algorithms to gather evidence more easily and with greater efficiency than time-consuming and costly property raids.
Tax inspectors have access to systems such as the Connect database, a £80m analytical system designed by BAE Systems. This database can carry out initial investigative work in a matter of seconds.
The system can collate data from both public and private sources, varying from social media to banks, and its sophisticated algorithms allow it to cross-reference data in tax records to recommend businesses and individuals for investigation.
HMRC also receives large amounts of data from the Common Reporting Standard, which allows it to obtain financial information on UK residents who have off-shore bank accounts from countries such as Bermuda and the Channel Islands.
Pinsent Masons Partner Steven Porter said: “HMRC is increasingly developing new and more efficient ways to collect data on taxpayers as it looks to meet its higher, tougher targets for investigations and prosecutions. Falling numbers of property raids by no means indicates a drop-off in activity.”
HMRC is also increasingly using AI to check tax returns.