They know, you know

Few people realise just how many sources of information H M Revenue & Customs can access.

I have seen a number of letters recently inviting taxpayers to reconsider whether their tax returns are complete.

Some letters hint at a specific source of information, while others are very general.

In many cases the returns are fine and there is nothing else to declare, but these letters should never be ignored.

Some are now appearing because HMRC has gained access to huge amounts of data from other countries.

Under the Common Reporting Standard, around 100 countries have agreed to share information about sources of income automatically with each other.

The fact that this is being done automatically rather than on the basis of specific requests is a game changer for tax authorities around the world.

Because the information is being exchanged electronically, it can be analysed and acted on more widely and more quickly than would have been possible a few years ago.

HMRC is becoming ever more effective at using digital technology to identify cases for attention.

It is not just new information from overseas that HMRC can access (and if you do have any undeclared overseas sources of income or gains, you need to take advice urgently as the rules change on 30 September and the penalties will increase substantially).

HMRC has access to a wealth of information from UK sources and uses its Connect computer system to compare that information with what is entered on tax returns.

Connect can trawl data at the Land Registry for example to pick up property ownership details and compare these with tax returns to identify potentially undeclared rental income or capital gains.

Details from stockbrokers, banks and building societies can also be used, as can information from the DVLA.

There are many more sources of data on your income including social media and the internet: images of your home and place of work are likely to be available to anyone who cares to look and have you ever thought about just who might be looking at your social media posts?

We live in an increasingly digital world, leaving numerous electronic traces behind us.

Tax authorities the world over know this and are becoming increasingly adept at using the information to challenge returns.

They are also increasingly using information they hold to help taxpayers get their returns right.

The world is changing, and tax compliance is inevitably changing with it.

Paul Aplin is a tax partner with A C Mole & Sons and President of the Institute of Chartered Accountants in England and Wales; you can follow him on Twitter at @PaulAplinOnTax or email him at