19 Jan 2017 11:35 AM

As a result of an investment of several years and over £100m, this is the first year that HMRC will have access to more than the information that taxpayers choose to submit on their tax return.

Connect is HMRC’s powerful new computer system. It gathers information from various sources including banks and financial institutions in over 60 countries, Paypal and the Land Registry. By studying the digital footprint that we leave behind us on the internet, the system is also able to cross reference data from Airbnb or eBay, for example, and identify inconsistencies that may reveal undeclared income.

Connect is capable of creating a typical profile of a taxpayers income, and if the information on the tax return submitted does not match the profile created, this is flagged and may be investigated.

In an unprecedented move, HMRC wrote to 10,000 tax payers last month asking them to check that they had not underpaid on their 2014/15 tax return by under declaring savings interest.

Of course, Connect should also identify where tax has been overpaid.

Following a change in the law and a crackdown on tax avoidance, taxpayers who do not declare foreign income and earnings from offshore accounts will be charged with a committing criminal offence. 

The penalties for providing inaccurate data on a tax return, or forgetting to include important information such as student loans, are likely to be punitive.

With the introduction of Connect, HMRC not only has access to more information and data, from many more sources, both domestic and overseas, but also has the ability to interpret data and patterns of financial behaviour. 

It will be looking for a return on its significant investment, so take it's advisable to take extra care when completing your tax returns in future.