Everyone has something they are not very proud of, cheating on their spouse, a mental health issue, a drugs problem, a secret love child, drinking too much alcohol, a theft or fraud and on it goes…. Max Mosley had a penchant for sex parties, Matt Hancock an office romance
Most of us can rely on the fact that no-one really cares because we are not rich or famous, so our secrets are safe, but are they? HMRC knows much more than you may think or like. It has access to all your bank accounts, everywhere in the world, the passport office, land registry, where you are and where you have been, your shopping habits, your gifts and it pairs this data with artificial intelligence so that it can tell which out of 10 hairdresser shops are the three most likely to be taking cash from the till and not declaring it, it spots irregularities and investigates.
But, has this data collection gone too far?
According to the Office of Tax Simplification it has not gone far enough
Most of us have nothing much to do with HMRC, we are employed and our employer pays tax on our behalf through the PAYE system. Then once in a while we may sell a valuable asset and have to pay capital gains tax or a loved one dies and inheritance tax is paid before we take out probate – very straight forward – but not for some.
There are 11 million of us who fill out a self assessment form every year, the self employed, company directors, and those with income in excess of £100,000 and for the rich it is often a nightmare to make sure that all receipts are included, rentals, pensions, dividends, charitable donations, gifts and capital gains and no that no invoices are overlooked.
There would appear to be a ‘tax gap’, the amount HMRC collects and what it believes it is owed, of £31 billion, 4.7% of total tax liabilities. ‘Failure to take reasonable care’ is the largest reason for the deficit of £5.5 billion, followed by £4.6 billion from evasion and £4.5 billion from criminal attacks and £2.6 billion from the hidden economy.
Currently all the information collected and processed by HMRC is primarily used for compliance – checking what you say in your self assessment return tallies with the information gleaned by HMRC from its sources of information.
Compliance is good, but HMRC wants to go further still. According to the 10 year tax administration strategy of HMRC, it would like to use the information gleaned to pre-populate your self assessment return. This would mean that just as income tax is collected from millions by their employers under PAYE, so financial information would be collected and submitted to HMRC by the investee, not the investors, so for example if you invest in shares in ABC Limited, you will not need to submit your dividend income on your self assessment form ABC Limited would provide this direct to HMRC and HMRC would pre-populate your self assessment form with this information.
HMRC wants to go further still - it wants to glean the information from your business accounts and merge that with your personal information. At its most basic an entrepreneur may wish to keep profits at corporate level to avoid the higher levels of income tax by merging corporate data with personal data it could then identify where profits are being hidden at the corporate level.
In the March Budget of this year the Treasury committed £68 billion to put in place a ‘single customer account’. Once in place there will be even less places to hide!
But is all this information just too much? Could it be a temptation for tax inspectors or hackers to glean personal information and sell it to the papers, or to criminal gangs for blackmail or kidnap or to the police? It is not as if it has not been done before, remember the Paradise Papers for example.
Then there is the problem of human error, what if the information supplied is wrong how can the taxpayer remedy the problem – how can he prove something over which he has no control?
Another concern is computer error – as was seen by the considerable distress caused by the Post Office scandal.
Of course, I am in favour of making life easier – and to increase the tax take where possible from cheats and human error – but there needs to be put proper checks and balances – not least because tax inspectors are passionate about raising taxes from people who they think are not paying their fair share – but that attitude does not always protect the innocent who may get caught in the cross fire and that danger can only increase with time.
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