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Ex-HMRC employee Tom Casagranda outlines research techniques used by HMRC for the purposes of selecting cases for enquiry.

Introduction

This article deals with the research methods deployed by HMRC to locate cases for enquiry, and just how much they know about their putative subjects.

Research Sources for Enquiries

Enquiries were located in a variety of ways: e.g., if you operated a clandestine activity, such as a strip club, or a massage parlour, not only would you be scrutinised by Immigration, but also by HMRC. If you advertised in Thames Valley Ad Trader, you would immediately be examined by the research side of HMRC. Likewise, if you appeared in the newspaper, promoting a new restaurant, a new kung fu club, plastic surgery, or second hand CDs, you would be scrutinised by HMRC. At one stage, I went through a phase or pursuing esoteric non-compliant members of the community such as Reiki Healers, fortune tellers, and hypnotherapists.
 
The second great way of obtaining enquiries was to look at planning applications in the newspapers, and whether someone's second property was converted from a shop to a series of flats. I would also locate, due to the rise of the migrant workforce, landlords that had mass occupancy. I would approach the local council, using powers in TMA 1970 s 18(a), and I would be furnished with a list of landlords and tenants. Consequently, I would approach the Valuation Office for a Covosearch, which would be a list of other undeclared properties owned by the landlord: the Covosearch would yield the date of purchase, and how much it was for.
 
The third way of obtaining non-compliant members of the community was via the Taxi drivers projects: this involved approaching the local councils with lists of possible taxi drivers: they, in turn, would furnish me with mileage details, how long the driver owned the car for, whether anyone else was driving the car, and how many employees a taxi firm had.
 
There were other ways of pursuing non-compliance: local authorities gave lists of student landlords, driving instructors, food premises licences, and commissions from Ann Summers sales, even. This was all placed on a system, operated from Bristol, entitled The London Information System (LIS for short). I also was able to access TPI (Third Party Information) databases regarding bank account details, Camelot commissions to newsagents, TESSAs, ISAs, Section 17 interest and Section 18 Shares Interest.
 
For a while, my team dealt with informants, who would telephone, complaining about all variety of things, from Rachmanesque landlords through to even, at one stage, a man whom the informant referred to as "Tony Hannibal The Cannibal", which was not put through for enquiry. Unfortunately, towards the end of my career in HMRC, the methods of pursuit became flawed: for example, one project that I spent many weeks on, was regarding owners of foreign debit cards: this yielded no cases whatsoever for enquiry, as the vast majoirty of the owners of these cards were of advanced years. Likewise, we became so target-driven, that I ended up having to pursue music teachers, who attempted to supplement a paltry income via private tuition.
 
Finally, another way of locating cases was by profiling sub-contractors that used a certain local accountant: in my view this bordered on victimisation. At the time it was a method that yielded some cases, but I was not a fan of it.

[ For further information on the enquiry process, see Nick Morgan's recent article - Everything you wanted to know about a tax investigation - should I go to a meeting? - Ed. ]