What you need to know when HMRC come calling

As a business, getting your tax right is something you can bring inhouse or outsource to an accounting firm – but either way, knowing what information HMRC can ask you to provide is important.

If HMRC gets in touch with you and opens an enquiry following the tax return submission for your business, it’s normal to feel a bit panicked – even and especially if you are completely innocent and provided everything required part of your tax return, in the finest detail possible. What this often means is that people comply with everything they are being asked for and end up providing more information than is necessary.

This leads to longer enquiries, gives HRMC more ammunition to play with, and ultimately results in more questions as part of a formal tax investigation. And for the business, this means more expense and heftier bills as the time it takes for the investigation to pass runs on and on…

Well, we’re here to keep you in the clear – and ensure that you provide HMRC with the relevant information without giving them more than they need, which in turn can make life a lot more difficult for businesses like yours.

What happens if HMRC ask for personal bank statements?

The main thing you need to understand here is that HMRC can request and be given access to anything which supports your business tax submission. If something helps HMRC to determine your taxpayer position then it should be passed over as part of the investigation, however it is not uncommon for HMRC to request more in the hopes of building up a more comprehensive view of your accounts – thus kickstarting a hunt for information rather than a case to overcome existing questions.

So, back to those personal bank statements. This is something that HMRC actually address themselves in their own compliance handbook, stating

“Non-business bank accounts should not be requested as a matter of course. However, where financial accounts are not based on a robust and effectively operated record keeping system which is supported by adequate and appropriate safeguards and/or include unvouched or unverified sums, it would be reasonable to request private bank details with the other records.”

What this means is that HMRC admit that they should only request those accounts and statements which can help to clear up questions about a business account or tax return.

Not only that but requesting personal bank statements can be considered a breach of the taxpayer’s rights under the Human Rights Act, by intruding into a person’s private life without just cause or proven need to do so. This is a bit of a grey area, but one which business owners should make themselves aware of and quote if they believe that HMRC are unfairly requesting access to personal documents.

What should you provide to HMRC?

HMRC can request whatever they like as part of an enquiry – but this doesn’t mean that you have to follow suit and hand it all over. In fact, what HMRC does and what HMRC is technically allowed to enforce are often very different, with the main takeaway from this article being that HMRC will likely ask for a lot more than they need in an effort to build up a comprehensive view of your accounting history and thus pose increasingly complex and unrelated questions.

When you get a tax investigation through, make sure you know your rights and, if that personal bank statement ask is printed, ascertain whether this is actually required as part of the investigation. In most cases, if you didn’t use a personal statement to fill or inform any of your business tax return, then handing it over to HMRC will not do you any good.

For more support on handling tax investigations, our team are always here to help!