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HMRC uses Hadoop to tackle corporate tax avoidance

As recently reported by Computer Weekly, HMRC has turned to using open-source big data technologies to analyse corporate tax returns. What does this mean in English, for business people?

Basically it's very simple. Probably for the first time ever HMRC has the ability to make direct comparisons of businesses tax submissions, comparing similar businesses to identify those which appear to be under-performing in their tax generation, and comparing businesses performance year on year to identify changing tax generation patterns.

Both of these dimensions can be used to identify businesses which appear to be candidates for investigation, and much sooner / more quickly than past methods, enabling HMRC to be much more focused and better target their investigatory resources towards tax evaders and avoiders. It is possible that within days of submitting a tax return a company may become a target for investigation. It is also more likely that when the Inspector calls he will have a much better idea about which rocks to look under.

Unfortunately computer systems are no judge of character, so it is inevitable that law-abiding businesses will be hit because their trading has seemed anomalous to the computer, and has been reported previously once HMRC get a bee in their bonnet they pursue it with relentless vigour, we shall have to wait to see if their determination and resolve is further boosted because "the computer says so". It is a common occurrence in other situations that people believe the computer to be infallible and it's hard to see how HMRC will avoid believing their computer systems over the real evidence they find on the ground when inspecting a business.

Big data processing has the power to significantly change, and potentially massively improve, HMRC's targeting of companies which pursue aggressive tax mitigation policies. We will have to wait and see how it pans out over time but it is difficult to believe that they will not take maximum advantage of their new computing capabilities, in which case those businesses which fly too close to the wind, or indeed step completely over the line, should tread very carefully. What you have got away with in the past will probably not be ignored in the future.

You can read more tax related articles at our sister website - Link4Business

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