Partner Article

For businesses something new is on the cards – HMRC!

This week HMRC upped the ante on tax evasion by announcing that information on all credit and debit card payments to UK businesses is to be made available to HMRC for the first time.

HMRC will now be able to access information from the UK’s merchant acquirers - companies that process card payment transactions - to determine the value and quantity of transactions completed by specific traders.

Having invested some £1bn to tackle fraud and evasion, HMRC’s new ‘Connect’ computer system, which crunches reams of data to identify potential evaders, will be used to process the new card payment information and make it useful for identifying evaders.

Connect is doubtlessly a formidable weapon for HMRC and a prudent investment for the future as the amount of data that can potentially be exploited increases. There is no doubt that to be effective in the modern age, HMRC needs to invest in technology to be fit for purpose.

Many people will naturally have Big Brother concerns about this news, although we have been assured by HMRC that no personal data identifying any card owners or card numbers will be obtained – it is traders, not consumers who are under the microscope.

We have concerns about two practical issues.

First, will the system really be able to reconcile card payment information, which will not be VAT-specific and could include VAT paid at a variety of different rates, and cross reference this against the VAT returns submitted by the businesses? While Connect is doubtlessly an impressive bit of kit, it really would be awesomeif it could achieve this.

Second, many smaller traders use PayPal and other online payment systems that aggregate the payments of many people and intercede with the merchant acquirers. How is this accounted for in the system? Larger traders are more likely to use credit cards as opposed to PayPal, and these are more likely to have properly prepared accounts. Could this push smaller traders towards PayPal (or even Bitcoin)?

This was posted in Bdaily's Members' News section by George Bull .