HMRC Connect: What It Knows and What It Means for You

Posted: 30th October 2025

If a tree falls in a forest and no one is around to hear it, does it make a sound? This classic philosophical thought experiment explores the nature of perception and reality. A similar question arises in the world of tax compliance: If I suppress my sales and don’t tell HMRC, will they ever know? The answer to both is almost certainly yes. Just because something goes unnoticed, doesn’t mean it didn’t happen. Trees still crash, and digital footprints will almost always be left. Reality has a way of outing itself…eventually. Here’s everything you need to know about HMRC Connect.

What is HMRC Connect?

Now more than ever, HMRC knows more about your income and sales than you might expect, even without you telling them. This is thanks to a powerful system called HMRC Connect, which was first introduced in 2010. Connect draws data from a wide range of public, government and other sources, including Companies House, the Land Registry, DVLA, PayPal, bank accounts, and even social media, to build a detailed financial profile of every taxpayer.

In a recent public statement, it was revealed HMRC and Connect hold over 55 billion items of data, and no, that’s not a typo. Connect’s reach was extended further in January 2024, following new regulations under Section 349 of the Finance (No.2) Act 2023. These rules require Digital Sales Platforms operating in the UK to report sellers’ income directly to HMRC, meaning platforms like Just Eat, eBay, Airbnb, and others now feed data straight into the Connect system.

You might think, “Well, I sell goods and services to overseas clients, so HMRC won’t know about that.” Unfortunately, Connect’s capabilities are global with over 60 countries now sharing information, allowing it to tap into international data sources. This means HMRC can track cross-border transactions and overseas income.

Crypto reporting starts in 2026

By now you’d be forgiven for thinking, “this is big brother watching you”, well Connect’s reach is about to go even further. From 01 January 2026, crypto asset service providers will be required to report details of the transactions and crypto assets on their platforms to HMRC under the Cryptoasset Reporting Framework or “CARF”. These reports will undoubtedly be used by Connect to identify taxpayers who HMRC believe to have under declared their taxes.

Where HMRC is focusing right now

Using the Connect system has allowed HMRC to identify patterns, and areas of the economy where tax compliance may be lacking. One of the areas HMRC have recently focused on has been online Market Place sellers and the Gig Economy. So, what does HMRC do with all this information?

Connect doesn’t just collect your data, it analyses it. Using various analytical tools including predictive modelling, statistical tests, and pattern recognition, Connect compares your tax returns with your financial footprint. So, if you report modest income but own luxury assets or make large unexplained deposits, Connect may flag you for a tax enquiry. HMRC’s compliance teams will review the information from Connect and can open an enquiry for further investigation.

Typically, HMRC will focus an enquiry on specific taxes such as VAT or Self-Assessment. However, if they suspect multiple tax streams are affected, they may initiate a full enquiry. The prospect of a HMRC enquiry often sounds very daunting, but that’s where we come in.

How we can help

Many clients come to us in a panic, and say one of two things:

HMRC are investigating me, and I don’t think I’ve done anything wrong, or
I’ve really messed up, please help.

In most cases, HMRC already has a clear view of your financial situation and may suspect that you’ve underdeclared your taxes. Even if you haven’t, they will still want you to fill any gaps.

With any HMRC enquiry it is important to get a handle on them quickly as delays can be misinterpreted by HMRC as you being uncooperative. By working with us, we can help you:

Manage your expectations – We’ll guide you through what to expect at each stage and will always be honest with you.
Manage your stress – We’re not just tax advisors but we are a listening ear and can handle the technicalities while you focus on moving forward.
Ensure tax accuracy – We can help ensure the tax HMRC assesses for is fair and correct.
Mitigate any penalties – By being proactive and working with us we can help reduce the penalties that HMRC may levy. We may not be able to reduce them to nil, but we will always advocate on your behalf.
Provide expert representation – We can help you liaise with HMRC, making sure they get the information they have requested, while protecting you from self-incrimination.
Manage HMRC’s Debt Management teams – Our help does not end simply because the enquiry has. We can help manage HMRC’s Debt Management teams, to push for realistic repayment plans, especially if you’re facing assessments for up to 20 years of backdated taxes.

Don’t wait for the knock on the door

HMRC Connect is not just a tool, it’s a digital watchdog. If you’re concerned about your tax position, now is the time to act. Whether you’re facing an enquiry or want to get ahead of one, don’t wait for the knock on the door. Let’s talk.