HM Revenue & Customs has social networking sites in its crosshairs. The target: the lives of taxpayers.

Over the last few years HMRC has developed a range of methods for identifying potentially undeclared earnings of individuals and businesses.

These can be unearthed in the form of expensive cars or boats.

HMRC’s Irish counterpart has already started to browse social networking websites, according to CCH Fee Protection.

“Although there have been no disclosed cases yet in the UK, it is just a matter of time before HMRC starts to use this new technique,” said Peter Horgan, managing director, CCH Fee Protection, a provider of tax fee protection insurance, and part of Wolters Kluwer UK.

CCH Fee Protection advises caution when posting personal information.

Small business owners or entrepreneurs, tempted to inflate their business interests on professional networking websites such as LinkedIn, or talk up their personal wealth by exhibiting their new luxury car or boat on Facebook, should think twice. This could spur investigations by the tax authorities, reckons CCH Fee Protection.

“Online data like this could lead tax inspectors to make assumptions about your earnings and lifestyle. If this impression doesn’t tally with the income you report to HMRC it is likely that you will get investigated,” continued Horgan.

In a recent report, Tackling the hidden economy, the National Audit Office recommended HMRC should:

• Analyse data from the DVLA to identify owners of high value cars and commercial vehicles
• Use more extensive data matching techniques to detect individuals who are paid in cash in risk sectors such as home repair, maintenance and improvement
• Collect lists of landlords that receive local authorities housing benefit

“If the economy slows and the revenue generated by Corporation Tax and personal taxes dips, HMRC will come under pressure to help make up the shortfall via more intensive compliance work,” commented Horgan.