Increased Investigations by HMRC Against Wealthy Individuals Using Artificial Intelligence Recover £1.5bn in Tax Revenue in a Single Year
In the UK, HMRC – the tax authority – is ramping up its efforts to sniff out hidden wealth and ensure unpaid taxes are settled, as claimed by law firm Pinsent Masons. The financial year ending 5 April 2024 saw HMRC collecting an extra £1.5 billion via special investigations, up from £713 million in the previous tax year.
This surge in tax collection is due in part to HMRC's reliance on cutting-edge technology, such as the 'Connect Computer System' (CCS). The CCS uses AI and 'big data' analytics to cross-reference vast amounts of data points – including business and personal tax records, credit card activity, travel history, bank interest details, and Land Registry reports – to pinpoint discrepancies or undisclosed income. This data-led approach forms the foundation for targeted investigations aimed at enhancing tax compliance.
HMRC also taps into overseas tax authorities, utilizing initiatives like the Common Reporting Standard and Global Forum. These agreements ensure HMRC is alerted when British taxpayers move assets to participating jurisdictions. Additionally, HMRC's wealthy and mid-sized business compliance directorate team works tirelessly to uncover hidden wealth stashes in the UK.
The specialist HMRC team defines wealthy individuals as those with annual incomes of £200,000 or more in any of the last three years, or those with assets above £2 million in any of the last three years. In the 2023-24 fiscal year, wealthy taxpayers contributed a significant £5.2 billion in tax payments – a notable rise from £4 billion the previous year.
An HMRC spokesperson confirmed their focus on ensuring everyone pays their fair share of taxes, regardless of their wealth or status, and noted the government's commitment to closing the 'tax gap' – the difference between the total tax owed and the taxes actually collected – to the tune of £7.5 billion annually by 2029-30.
Sources:
- Pinsent Masons, 2023
- HM Revenue & Customs, 2024
- National Audit Office, 2023
- This is Money, 2023
- As the UK tax authority HMRC increases its crackdown on hidden wealth, some individuals are considering diversifying their income streams, such as investing in pensions or personal-finance products, to ensure they are complying with tax regulations.
- The increasing focus on financial transparency from HMRC, with support from technology, overseas tax authorities, and data-driven investigations, underscores the importance of accurate and updated business and personal finance records.
- With advancements in technology, the finance sector may see more implementation of AI and big data analytics to maintain tax compliance, urging businesses and individuals to stay informed about their tax obligations and potential implications on their business and personal investments.
