HMRC trials data analytics in battle with tax fraud

22nd October 2013

A recent HM Revenue and Customs (HMRC) trial looking into new methods for reducing the number of tax fraud cases identified £20 million of potential losses after around a third of 16,000 sample cases displayed irregularities.
The tax authority has spoken of plans to make use of "sophisticated data analytics" going forward as part of its overall strategy to tackle the issue of tax credit fraud and error.
Although the level of incorrect payments currently stands at its lowest level yet, HMRC revealed it continued to cost the taxpayer an eye-watering £2.09bn in 2011/12.
HMRC has been asked by ministers to explore the types of service the commercial sector can offer on a grander scale, with the potential of liaising with suppliers to gain a greater awareness of indicative costs, timelines and benefits prior to inviting firms to tender.
The bigger picture is that HMRC will seek to expand its workforce to increase the number of successful tax credits compliance interventions and minimise the number of errors that cost the taxpayer dearly.
HMRC operated a minor trial between May-July 2013 with Transactis and sub-contractor Bosch recruited to carry out small-scale trials in line with standard Cabinet Office regulations. A summary of the trial is yet to be published.
HMRC also confirmed this week it was clamping down on unscrupulous "pension liberation" schemes in a bid to thwart pension fraud. Growing numbers of savers are being approached by spam messages, cold calls and online promotions to encourage them to release some of their pension as a lump sum or loan before they reach the age of 55.
However, individuals are often unaware that a large part of their pension fund will be deducted as fees by such schemes, and there are also significant tax consequences to releasing cash before the law allows – typically at the age of 55.

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