Investigations

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
I wonder if any of the well read accountants out there can help???

I know I read somewhere (I thought it was 'Tips and advice on tax' but apparently not) that if someone is under investigation and it proves difficult to provide information i.e. they want old years bank statements and the bank is going to charge for them - you can write to the taxman stating it is 'onerous to provide the information'. However I can't find the original article and we may need to use it. Has anyone seen it or can anyone point me in the right direction?

Annette

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Investigations

    Hi Annette,

    The situation you are in is a (more or less) similar one to one we had a few years ago. The rules may have changed since.

    The fact is that your client can ask his bank for the statements and be provided with them, therefore the information is available and it isn't going to cause a great deal of upheavel in arranging for those bank statements to be reproduced. It may be that your client may not (or does not) want to pay for them to be reproduced in which case I doubt the Inspector would agree this is "onerous" i.e. troubleome or burdensome. In any case you could try at least to say it is onerous because you act for the client and not the inspector and see what they come back with - they may well agree!

    If he is going back a few years [in which case such transactions could possibly be outside the scope of a normal inspection in terms of time] then he may have his reasons. However, you could argue the case that if he does want to re-visit prior year tax returns, which fall outside the year(s) under review, then he should follow protocol and issue the relevant enquiry notice.

    If the missing bank statements do fall within the year(s) under review then the inspector could have 2 choices. One would be to force your client to provide the information (section 19a I think) or two they could agree a "scale". i.e. if the inspector and your client agrees, let's say, income has been suppressed, they could scale it back over an agreed number of years and pay the back-tax that is due.

    Your client may do well to cooperate as if they have underpaid tax they will be charged interest. Interest can be discounted depending on the level of cooperation by your client though this is at the discretion of HMRC.

    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Investigations

    Besides, The charge will be an allowable expense for next year, wouldn't it? (provided there wasn't any problems found)

    It wouldn't be unknown for our friends at HMRC to over estimate the amount the income has been suppressed. And then you would have to get the statements to prove that was the case anyhow.

    Guilty until proven innocent!!!!!
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Investigations

    The problem is that the client has never had to do tax returns (only benefit income) we have asked why assessments for 2003, 04 and 05 have been issued and been told just random generated enquiry and we can't find anything that is unusual to suggest anything else. Very little will be on tax return apart form bank income as HMRC have agreed that the benefits she has received are not taxable.

    To get the 03 bank statements are going to incur a charge of £5 per sheet (therefore at least £60) which is not really affordable when on benefits.

    What would you suggest? I'm sure this article I read dealt with a case under almost exactly the same circumstances.

    Annette
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Investigations

    Hi Annette,

    On this basis I would then go back to HMRC and say that it is not cost effective for your client to meet the costs of reproducing the bank statements. I apologise I assumed your client was a trading client, not an individual on benefits.

    I fail to see what HMRC are going to gain out of this. Going back to 2003 is unreasonable and is out of the enquiry window for a start and the bank interest will have taxed at source anyway - they do have the powers to make assessments going beyond the enquiry window but I doubt the amount of unpaid tax (if any) would be substantial enough to warrant all this effort. Sounds to me like they've had an intake of new trainee inspectors and you've been landed with one of these.

    I would revert back to HMRC explaining the situation and asking the inspector for a "mutually beneficial and speedy conclusion to the matter". I usually find in these circumstances they co-operate when they realise there's not much (if any) unpaid tax.

    Steve

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