Tax Return without bank statements

droobledrooble New MemberRegistered Posts: 8
Hi

I have a client who is CIS registered and been working under CIS since 2009. He did not tell HMRC that his status had changed, so we have now registered him as self-employed and waiting for the failure to notify fine!

I now need to do his tax return for 2008/2009 to-date, I have CIS statements, but no bank statements for the older years. Do I need them, or am I safe to assume I have all his CIS statements (given that I will be understating the tax he has paid if any are missing, and therefore any rebate due will also be lower?)

Has anyone else had this issue? Other clients that want you to do their tax return based on receipts and sales notes alone, without supplying bank statements.

Any help would be much appreciated.

Comments

  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,069
    If you don't have bank statements but have other decent prime records, then you can go with that.

    You can only do what you can do.
  • stevo5678stevo5678 Well-Known Cheltenham Registered Posts: 326
    You don't always need bank statements. As long as you know what the income and expenses are and can vouch them then the bank statements will not add anything and is not a requirement.

    If however you were doing a set of accounts which required a balance sheet then that is different...
  • BobJollyBobJolly New Member Registered Posts: 10
    From me with a lot of years under my belt!!

    Firstly get him registered with HMRC under SA and don't forget to get him registered for Class 2 NIC the Self Employed people in Newcastle. Nowadays it can all be done in one application....but the Class 2 people have some nasty things up there sleeves as well as the straight tax people. So right, there will be fines all round. However, as there appears to be tax refunded there will not be quite so much in the way of penalties (if any).

    Anyway, I wouldn't stand for any nonsense. I would contact the Revenue and tell them the facts and that you will deal with things in the best way. They will put a note on the file to that effect.

    Briefly, I would get the bank statements for the whole periods concerned (you can get an authority for that). You cannot work things out on thin air. And...get him to pull his finger out an get details of earnings from the book-keepers of the firms he worked for.

    If not, then compile schedules and work the gross out. You then have a pic of what it should be like.

    You can then get some accounts (....x's...???....be careful) stating that everything has been prepared with proper books being provided and had to rely on estimations given to you. Get your client to sign right near your certificate.

    Going to the TR. Put all this detail in the white spaces. Incl the schedule of estimated tax deducted and how it was arrived at. Where you have certificates you can state that fact separately. Make sure the HMRC get the facts. This is not to protect you but to protect your client from being seen to make false statements in his Returns.

    The HMRC will be hard pushed to make any refunds. If the client ends up with a little bit of tax to pay as happens in the cases now, then that will be the best outcome and the Revenue will be wanting all this paid up straight away.........and that might soothe their brows............

    You are not RESPONSIBLE for your client and if you feel uncomfortable and doubt the guy, then don't act. A child of 13 in your local high school knows that a self employed person has to deal with the Revenue....so come on...don't be sorry for him.

    My immediate thinking. Hope it all goes OK.

    Bob
  • stevo5678stevo5678 Well-Known Cheltenham Registered Posts: 326
    I just want to reiterate the fact that bank statements are not a requirement for a tax return.


    As long as there are records to support your numbers then thats it. A bank account is just conveniant way of having all the figures. There is no requirement for a trader to even have a bank account unlike a Ltd Co.

    Ive worked in Chartered firms for years and can tell you this is normal.

    You have CIS statements which are the single most important thing for subbies. Its proof of earnings and tax deductions. Theres nothing unusual about this at all. This is a standard tax return for a subbie.

    "Working in the construction industry
    If you work in the construction industry you'll need to keep records of all your income and expenditure - whether you're paid 'gross' or with deductions towards tax. If deductions are made you'll need to keep your payment statements and - where higher rate deductions are made - the verification number. You'll need these for your Self Assessment tax return to reclaim any overpayment of tax."


    Cash-boooks, bank statements, sales ledgers etc etc vary from client to client depending on the complexity of its business. A subbie is not complex, it is simply a) what is my gross income b) what are my deductions (both on the CIS statements) and c) what are my expenses (from my receipts). Ask the client if he has received any other income that he has no statements for such as cash and go with what he says. All the revenue care about is that you have records to prove the numbers on the tax returns.

    Don't start messing around with the white spaces in the return either as your suggesting something is not right or unusual,

    Also forget about accounts. Why would anyone produce accounts in this instance when an I & E is fine? Dont waste your time unless the bank or anyone requires them.
  • droobledrooble New Member Registered Posts: 8
    Thank you Bob - that's really helpful to me
    BobJolly wrote: »
    From me with a lot of years under my belt!!

    Firstly get him registered with HMRC under SA and don't forget to get him registered for Class 2 NIC the Self Employed people in Newcastle. Nowadays it can all be done in one application....but the Class 2 people have some nasty things up there sleeves as well as the straight tax people. So right, there will be fines all round. However, as there appears to be tax refunded there will not be quite so much in the way of penalties (if any).

    Anyway, I wouldn't stand for any nonsense. I would contact the Revenue and tell them the facts and that you will deal with things in the best way. They will put a note on the file to that effect.

    Briefly, I would get the bank statements for the whole periods concerned (you can get an authority for that). You cannot work things out on thin air. And...get him to pull his finger out an get details of earnings from the book-keepers of the firms he worked for.

    If not, then compile schedules and work the gross out. You then have a pic of what it should be like.

    You can then get some accounts (....x's...???....be careful) stating that everything has been prepared with proper books being provided and had to rely on estimations given to you. Get your client to sign right near your certificate.

    Going to the TR. Put all this detail in the white spaces. Incl the schedule of estimated tax deducted and how it was arrived at. Where you have certificates you can state that fact separately. Make sure the HMRC get the facts. This is not to protect you but to protect your client from being seen to make false statements in his Returns.

    The HMRC will be hard pushed to make any refunds. If the client ends up with a little bit of tax to pay as happens in the cases now, then that will be the best outcome and the Revenue will be wanting all this paid up straight away.........and that might soothe their brows............

    You are not RESPONSIBLE for your client and if you feel uncomfortable and doubt the guy, then don't act. A child of 13 in your local high school knows that a self employed person has to deal with the Revenue....so come on...don't be sorry for him.

    My immediate thinking. Hope it all goes OK.

    Bob
  • droobledrooble New Member Registered Posts: 8
    Thank you Stevo
    stevo5678 wrote: »
    I just want to reiterate the fact that bank statements are not a requirement for a tax return.


    As long as there are records to support your numbers then thats it. A bank account is just conveniant way of having all the figures. There is no requirement for a trader to even have a bank account unlike a Ltd Co.

    Ive worked in Chartered firms for years and can tell you this is normal.

    You have CIS statements which are the single most important thing for subbies. Its proof of earnings and tax deductions. Theres nothing unusual about this at all. This is a standard tax return for a subbie.

    "Working in the construction industry
    If you work in the construction industry you'll need to keep records of all your income and expenditure - whether you're paid 'gross' or with deductions towards tax. If deductions are made you'll need to keep your payment statements and - where higher rate deductions are made - the verification number. You'll need these for your Self Assessment tax return to reclaim any overpayment of tax."


    Cash-boooks, bank statements, sales ledgers etc etc vary from client to client depending on the complexity of its business. A subbie is not complex, it is simply a) what is my gross income b) what are my deductions (both on the CIS statements) and c) what are my expenses (from my receipts). Ask the client if he has received any other income that he has no statements for such as cash and go with what he says. All the revenue care about is that you have records to prove the numbers on the tax returns.

    Don't start messing around with the white spaces in the return either as your suggesting something is not right or unusual,

    Also forget about accounts. Why would anyone produce accounts in this instance when an I & E is fine? Dont waste your time unless the bank or anyone requires them.
  • BobJollyBobJolly New Member Registered Posts: 10
    Bless you and best of luck. Don't forget.....it really isn't worth acting for someone who has already shown to be so irresponsbile.

    End of!!

    All the best.

    Bob
  • BobJollyBobJolly New Member Registered Posts: 10
    Be careful about the fact about NOT NEEDING BANK STATEMENTS.

    I totally disagree with that person that said that. Sorry. You really need to have these if that is where his business earnings are paid into. Part of the books of account......as such!! It would look very shabby to the Revenue if they asked why you hadn't taken into account a 'business bank account' when preparing accounts. The client (regardless of his unhelpful attidude) would escape from his sins and immediately accuse you of not doing your work properly.......and rightly so. So don't be taken in by that previous commentary.

    And........you will have to really get to grips with what other bank accounts and building society accounts too. You are not auditing and you are not doing the Revenue's work, but you are expected to be professional and caring to the client (even if seems you are thinking more about the Revenue and yourself). Anyway, you need such information to find out what interest there is to go on the Tax Return. My opinion. Obviously there are others!! To whom I apologise AND I do know where he is coming from......but, I do not agree with such a broad statement. Bob
  • droobledrooble New Member Registered Posts: 8
    Thanks for all of your replies

    Thanks for all who commented.

    My gut feeling is that I need bank statements. It's just how I roll, I guess. I always feel that this are my back up of the source documents (which he could have lost). I know he could have other bank accounts that he could withhold, but I at least have to try to trace the payments through.
    The client is a self employed building contractor who literally has no idea about how HMRC works (why would he?) and has put off sorting his finances out because he is scared. Not an excuse at all, but he is like many sole traders in that he is scared of numbers and tax.

    I have not asked him for his older bank statements yet, only because I can imagine how difficult it will be getting them from Santander (the devil!). But I will. I think I just needed at least one person to tell me to follow my instinct.

    This guy wants it sorted, and he is paying me to do so, I owe it to him and myself to do it right!
  • stevo5678stevo5678 Well-Known Cheltenham Registered Posts: 326
    BobJolly wrote: »
    Be careful about the fact about NOT NEEDING BANK STATEMENTS.

    I totally disagree with that person that said that. Sorry. You really need to have these if that is where his business earnings are paid into. Part of the books of account......as such!! It would look very shabby to the Revenue if they asked why you hadn't taken into account a 'business bank account' when preparing accounts. The client (regardless of his unhelpful attidude) would escape from his sins and immediately accuse you of not doing your work properly.......and rightly so. So don't be taken in by that previous commentary.

    And........you will have to really get to grips with what other bank accounts and building society accounts too. You are not auditing and you are not doing the Revenue's work, but you are expected to be professional and caring to the client (even if seems you are thinking more about the Revenue and yourself). Anyway, you need such information to find out what interest there is to go on the Tax Return. My opinion. Obviously there are others!! To whom I apologise AND I do know where he is coming from......but, I do not agree with such a broad statement. Bob

    My bold writing is straight from the hmrc site and like i keep on repeating there is no 'requirement' for bank statements.

    I stand by every word and am fortunately backed up by hmrc who do not specify bank statements as a 'requirement' for SUBBIES

    Never seen hmrc have any issues (why would they when you have proof of income). However some accountants tend to take alot of time taking a belt and braces approach. Im not denying having bank statements is good practice but we run businesses here and calling around the banks to get statements just because hmrc might think it looks better is hardly efficient.

    Its all about what you can prove not how it looks. 90% of our subbies have no BS and we have been going for 25 years and are regulated by ICAEW.

    My facts come from HMRC who make it clear that income vouchers with deductions are everything for subbies.

    All this talk about tracing payments is ridiculous for subbies. They can pay it in their nans account for all i care as long as i have their vouchers and a declaration (by approving the return) that all their income has been declared. I am not doing an audit nor am i a police officer who thinks they are criminals conceiling money!

    For the record my post was in respect of an average subbie. For many businesses bank statements are essential. Its about being experienced and professional enough to determine this your self which comes with time.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,069
    In an ideal world, all clients would have bank statements.

    The point Stevo and I were making is that if you really can't get bank statements, you can still draw up a tax return.
  • BobJollyBobJolly New Member Registered Posts: 10
    I really need to see what that other correspondent is saying about the need for no bank statements.........total nonsense if you ask me. Sorry. Actually, worse still there is now an expectation that a professional accountant when submitting things to the Revenue is in fact seen to be complying with the need that certain standards are in place.......and that can attach themselves to the FRSSE. Most CCAB professionals will direct their clients in a way that allows the outcome to achieve this. I do assure you that the AAT being a member of the HMRC Working Together Group (as it were) will be right there.

    What a can of worms all this has opened for you!!!

    You either do a professional job or not. In a court of law your professional standards could be questioned otherwise. By the way, I am sure that Santander will give you duplicates. Like all banks there will no doubt be a charge. Depends how you go about things. Anyway, I will now simply wish you well with things.

    Me, again, Bob. Best of luck
  • jow774jow774 Trusted Regular Registered Posts: 465
    The responsibility for the tax return lies with the client, that is why they have to sign to say that they agree with the information therein. If the client insists that a return is prepared without a bank statement assuring the accountant that the figures are correct and they are made aware of the consequences of failing to provide the correct information then what other responsibilities do we have? In an indeal world every client would have a perfectly prepared tb with all the corresponding information but as we all know this isnt achievable in the real world. This is why so many people need an accountant!
  • stevo5678stevo5678 Well-Known Cheltenham Registered Posts: 326
    The rules are the rules and HMRC clearly state what records a subbie must hold. Bank statements are not part of that 'must' list.

    It is not a requirement to bank all your business income, only to disclose all of it. (CIS statements) If the client was trying to conceil income would he really be banking it anyway? Bob do you realise the difference between an audit and a tax return as an audit is where the accountant makes a declaration that the accounts are 'true and fair'. A tax return is about the client's declaration (we as accountants direct them in a professional manner).

    Bob Im sorry but as a CCAB accountant I don't see where you are coming from ( 'in a court of law' and talking about the FRSSE in the context of a subbie is a first, its all about tax legislation). I prefer facts over personal opinion and that is 'professional'.

    I think you have gone a little off track here and doing plenty of generalising. As long as the correct profit is disclosed and the records and the clients explanations agree then thats it. Just because you have bank statements doesnt mean the return is more 'professional'. A subbie needs to declare his income and does not have to do a balance sheet.

    Eveyone is entitled to their way of working but the FACT is that bank statements are not compulsory for a subbie (unlike the cis statements). This does not make an accountant unprofessional, that's a riduculous accusation.

    I believe there is no more to add to this.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,069
    Bob, a belated welcome to the forum. You'll find us a friendly, helpful bunch and it's not great form to arrive and begin in such a tone - not such a great way to make friends.

    If you can back up your assertions that the FRSSE is required for a sole trader subbie, or that the Revenue are wrong in not listing bank statements in their guidance, then we would be grateful to hear the sources and to learn from your expertise. All of us on the forum have something to learn from everyone. However, jumping on respected and knowledgeable members of the forum and suggesting they are unprofessional is just plain rude, especially when you are new to the community.

    I fully agree with Stevo, and I believe he has stated his case calmly and clearly (and very eloquently).
  • stevo5678stevo5678 Well-Known Cheltenham Registered Posts: 326
    Monsoon wrote: »
    Bob, a belated welcome to the forum. You'll find us a friendly, helpful bunch and it's not great form to arrive and begin in such a tone - not such a great way to make friends.

    If you can back up your assertions that the FRSSE is required for a sole trader subbie, or that the Revenue are wrong in not listing bank statements in their guidance, then we would be grateful to hear the sources and to learn from your expertise. All of us on the forum have something to learn from everyone. However, jumping on respected and knowledgeable members of the forum and suggesting they are unprofessional is just plain rude, especially when you are new to the community.

    I fully agree with Stevo, and I believe he has stated his case calmly and clearly (and very eloquently).

    Thanks Monsoon, you do have a way with words :)

    I agree with everything you said.

    Bob, welcome again. I think we should let this thread die now... Maybe we can all agree on another topic :)

    You are of course entitled to your opinion and I/we respect it.
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