HMRC get sneaky and check credit applications to taxable income
Tax avoidance is still rumbling around everywhere, but regardless of your personal opinion of the activities of companies like Starbucks, what they are doing is not illegal. Nevertheless, Starbucks are reportedly 'talking' to HMRC about potentially paying
some more tax. However, HMRC were fully aware of what Starbucks were doing, even if they were powerless to do anything; not telling HMRC about your income in the first place is actually tax evasion, the one against the law, the one that could mean you wind up in prison. And HMRC have been trialling a new way of catching naughty tax evaders out.
You see, when completing your tax return, people who are that way inclined will always try and understate their income in order to minimise the amount of tax due. However, when it comes to getting credit, be it something as big as a mortgage to as small as a payday loan, these same people may well inflate their income in order to look like the best credit risk possible. With a show of startling intellect, HMRC have cottoned on to this and have been piloting a new investigation stream that compares credit reference agency data with that included on tax returns. Sneaky.
Of course, many people don’t really have much scope for tax evasion proper- if you are solely employed and your wages are subject to PAYE, there isn’t generally a lot of wiggle-room as far as your tax liability is concerned. Even if you have mistakenly inflated your income on a credit application (which is inadvisable, as if they find out, you will be in trouble, credit-wise), HMRC will have nothing to chase you for. It is likely to be the self-employed, or those with shady off-shore accounts, who will be caught by this kind of initiative, as they have greater opportunity to ‘forget’ to advise HMRC of some income. HMRC will also cross-check spending patterns to income- if you have paid off credit worth £20,000 in a tax year, but have only declared £5,000 of income, HMRC are going to want to know how this is possible.
The pilot scheme has been running with 20,000 taxpayer's credit applications being reviewed, and HMRC are due to publish figures of its success later today. And it does seem to have been “successful”, with an announcement of a national roll-out widely anticipated and expected to affect up to 2 million people.
Big brother, anyone?