The vast amount of data at HMRC’s disposal has become a problem of sorts in that it has completely overwhelmed HMRC’s human resources.
This has resulted in HMRC increasingly relying on computers to identify potential anomalies, and relying on computers to automatically generate tens of thousands of so-called “nudge letters” to taxpayers suggesting they might have something to disclose, and then relying in the main on taxpayers to voluntarily disclose anything they might have deliberately or accidentally got wrong.
Not all taxpayers who have underpaid their taxes will opt to make a disclosure – either because they want to continue to believe they have got everything right even when revisiting would show they have not or because, increasingly, they do not expect HMRC to have the resources to investigate them.
If HMRC had the resources to open investigations into a statistically significant proportion of offshore account holders – including a fair number of purely random enquiries – it stands to reason that HMRC would have a reliable idea what the average level of offshore non-compliance is.
Surely, HMRC’s self-professed cluelessness of the scale of the problem underscores both the very limited and highly resource-constrained level of HMRC’s traditional enquiries and investigations into people holding offshore assets, as well as HMRC’s own lack of belief that predominantly relying on computerised data trawling and nudging is anything other than inherently limited in what it can uncover.
Andrew Park is tax investigations partner at Andersen
