HMRC can use their information powers to request private records, including bank and building society statements, paying-in slips and details of property or other assets. The information or documents requested must, however, be reasonably required for checking the taxpayer’s tax position. HMRC state that reasonable equates to ‘fair and sensible in the circumstances’. Whether a request is reasonable is, therefore, dependent on the circumstances in each case.

The opening letter of a compliance review or enquiry will normally include a request for the business records to be sent to HMRC. Any request in the opening letter for private records to be sent should be resisted, unless it is clear then that the accounts for a business are not based on sound and well-kept records, and that they include unvouched or unverified sums. If the records are clearly inadequate, HMRC will be justified in asking to see private records.

HMRC explicitly state that they accept that depositing in a private account correctly and contemporaneously recorded drawings from a business is not sufficient grounds for asking to see the private records for that account.

HMRC also accept that where any unvouched or unverified items relate only to minor matters it would be inappropriate to ask to see private records. They consider minor matters to be such things as the business proportion of household expenses when the home is used for business purposes, laundry bills, etc.

As private records do not form part of the statutory records they are supplementary information. If the taxpayer does not consider that they are reasonably required for checking their tax position, an appeal can be made to the Tribunal. There the officer will have to satisfy the Tribunal that the information is reasonably required.

Matters which HMRC have indicated that they consider would make it reasonable to request sight of private records include where:-

  • payments from an account into the business, for example capital introduced, are unverified and treated as non-taxable
  • it is reasonable to suppose that business records (or the equivalent for non-business transactions) are incomplete
  • it is reasonable to suppose that undeclared income or gains have been credited to the account
  • the officer has doubts or questions about means or capital growth
  • it is reasonable to suppose that the return was based, wholly or partly on the ‘private’ bank account documents
  • taxable receipts or expenditure are unvouched or estimated and it is reasonable to expect that this expenditure should have been vouched or recorded.

 

When requesting private records, HMRC acknowledge the need to take account of:-

  • the cost – for example the cost of obtaining duplicate bank statements
  • the taxpayer’s right to privacy – the officer must be able to demonstrate that seeing the private records is an effective way of checking the person’s liability to tax and that it will cause minimum necessary intrusion into their private lives.

Call Kinsella Tax Investigations NOW on 0800 471 4546.

kinsella_remarketing_banner-300x250-1

We're here to help you. Call 0800 471 4546 for free confidential help and advice 24/7
or fill in your details below.





Enter captcha below:

*Please do not use this form to report suspected tax fraud or evasion or to sell your own services.

kinsella_remarketing_banner-300x250-2
Translate »