Leveling the playing field – tax compliance v tax evasion

The latest innovative move by government officials is to use details of debit and credit payments to match against the declared income of businesses in an attempt to highlight those who don’t disclose all their profits. The sole item on their agenda is to clamp down on fraud and tax evasion.

This move may seem like pure common sense and a measure that should be in place anyway, as technically all the data is already held by someone, somewhere in one form or another and it really is just a case of tying it all up and highlighting the gaps, for which the “data robots” can do at the click of a button. However, this new concept is thanks to part of a near £1bn investment made by the government to HMRC to tackle fraud and tax evasion issues.

What’s new?

From 1 September, this new legislation now gives HMRC the authority to access information on all credit and debit card payment made to UK businesses in the last four years. HMRC has begun the process this month with requesting data from merchant service providers, the processors of card transactions, after which the data can be cross referenced with information held by the tax authority generated from the filing of tax forms. This will subsequently be an annual process though so this is a long term plan of action being enforced here!

Big savings forecasted

They believe this will be a tool to “level the playing field” with businesses and the measure is expected to reduce fraud by more than £50m a year!

Of course, tax evaders generally try to find further loopholes around legislation, perhaps in this instance via cash payments, however, it sounds like the HMRC and the “officials” beyond mean business and this is a robust method for cross analysis.