New ruling allows French tax authority follow in HMRC’s tracks and start “cyber stalking” as part of tax investigations

A new ruling has allowed the French tax authorities to start trawling social media platforms to look for evidence of tax evasion. What many UK taxpayers may not be aware of is that HMRC has already been trawling through taxpayers Facebook and Instagram accounts for years to look for evidence of tax evasion.

The ruling in France allows the government to look at the profiles, posts and pictures of French taxpayers, provided there are no privacy settings on those social media accounts.

The use of social media allows tax authorities to build a picture of a taxpayer’s lifestyle and cross-reference this with income declared. If it looks like an individual is living beyond their means then this may provide the grounds for an inquiry into their affairs.

Taxpayers in the UK need to be aware that when that they are posting online that their social media accounts may, similarly, be looked through by HMRC.

Kevin Igoe, Managing Director at PfP,  comments “It always comes as a shock to people how much information HMRC has about them and their routes to this information.  They are continually looking for more ways to gather information and I suspect we are nowhere near the limit of their ambitions.”

A recent case involved HMRC investigating a ‘jobless’ Londoner whose lifestyle consisted of golf and exotic holidays. This lavish lifestyle was funded through evading tax on smuggled tobacco – whilst being documented on social media. Other recent cases include:

• HMRC found a former charity worker openly posting about holidays consisting of cruises and staying in Presidential suites, which was funded by false Gift Aid claims
• HMRC found a businessman was using money saved through VAT tax avoidance to fund his extensive collection of extravagant cars and a holiday home in Spain

Another famous example is when HMRC caught individuals featuring on the Channel 4 programme My Big Fat Gypsy Wedding spending thousands of pounds on luxurious weddings, whilst failing to declare any income.

Beyond trawling through social media profiles (it is important to make sure yours is set to “private”) and data shared by foreign tax authorities, HMRC also relies on tip offs from the public. It receives over 100,000 calls per year on suspected tax fraud or evasion through its Fraud Hotline.

Investigations can not only take up considerable amounts of time and resources but obviously could also lead to penalties being imposed. Penalties can be up to 100% of the amount HMRC believes it is owed – depending on whether HMRC thinks mistakes were deliberate.

HMRC issued over 31,500 penalties for “deliberate” mistakes last year, which carry a fine of up to 100% of tax owed, and over 82,000 for “careless” mistakes, with a fine of up to 30%.