tax investigation private bank statements

tax investigation private bank statements

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My client, a partnership, is being investigated under 12AC taxes management act. After sending in business bank accounts and paperwork backing up the business records the inspector has come back to ask "I note that there were items of expenditure paid for from the private bank account, similarly there ere sales paid into this account. I will therefore need to see the partners private bank statements".

Do we have to provide these at this stage in the investigation - what would you do?
Sarah Kedgely

Replies (7)

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By John Savage
31st May 2006 12:41

August??....
Blimey, Nicki, no wonder I'm getting so old so fast!!

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By gordonberry
29th May 2006 17:22

Do Bank Rec's confirm income paid into private bank account?
Inland Revenue will always try and get their hands on private bank statements, in order to do a little fishing and they will employ some rather disingenuous methods to achieve this.
If it were expenditure only, then there is a possibilty of rebuttal.
If business income is banked in private bank statements, then client has effectively made them part of the business records.
However, just before we accept that the Inspector is entirely accurate. Did you do bank reconciliations that records where all lodgements of business income were banked?
If so, is what the Inspector says, true?
If the Inspector is correct, then you know he is going to try and treat every single lodgement in the private bank statements as business income, so you had better get the client started on corroborating evidence to prove otherwise, where appropriate.

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Me!
By nigelburge
29th May 2006 15:26

Perhaps
If what the Inspector is saying is correct,and P/ship income and expenses have indeed gone through private bank statements, then I would let him have copies of these.

If you resist, he will no doubt issue a formal request and would be likely to have it supported by the Commissioners.

HOWEVER, before you send the Inspector copies of private bank statements, get your client to clearly mark these up with ALL sources of bankings. If you don't do this, it will only provoke more questions.

In the future, try and get your clients to avoid using private bank accounts at all to prevent this occuring in the future. Sometimes it is very hard, I know!

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By IanRiley
29th May 2006 15:28

Don't think you've got a choice
If what the inspector says is true and business expenditure and income was paid/received through the private account then the statements to this account form part of the business records and must be provided.

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By User deleted
31st May 2006 10:22

How time flies! The article was actually published
last August, thank you for the recommendation John.
Everything you ever wanted to know about disclosure of private accounts...
https://www.accountingweb.co.uk/cgi-bin/item.cgi?id=144240&d=786&h=784&f=785

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By John Savage
30th May 2006 09:32

Similar situation
I had a similar situation to this once several years ago, the client had a very few items going through his private account. I copied the statements, after masking any of the non-business transactions and balances, and produced the photocopies.

You must also realise that the Inspector has no right to make you send the records to him/her, you only have to 'produce' them. It is my policy to not send clients' books and records in to the tax office, the Revenue 'inspects' them at my premises.

I know others will disagree with me here, but until there is any change in law, that is the way things are.

Don't also forget to quote the right to privacy contained under (I believe) Section 8 of the first schedule to the HRA. Nicki Ross Martin did an excellent article on this several weeks ago now. Worth finding that article and using it.

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By AnonymousUser
30th May 2006 07:35

It's why...
It's why you should personally go through each of your personal bank accounts every month and mark down what every deposit was, saving every reciept. You don't want IR to deem something was income when it was something else.

I think it's reasonable if you're using your personal account for business for them to ask to see the personal accounts. It's the oldest trick in the book, why shouldn't they catch people at it?

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