How would you approach the conversation if a client with a limited company is providing insufficient records and is declaring particularly low income to HMRC? For instance, current client I am working on has provided their own workings, substantiated by bank statements, but no sales invoices. Company has reported losses the past couple of years and the only income recorded for the purposes of his Self Assessment Tax Return is remuneration from the company of £8,424.
I am unsure how to approach the subject of what he is living off - clearly most people cannot live off of £8,424 per year unless they have a particularly well paid partner or benefactor. Do you go for the 'Due to AML legislation we are required to verify....' approach or the 'if HMRC were to launch an enquiry...' approach or something else? Or do you just take their word and rely on the fact that they have signed to say that they've told you everything?