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