tax query

tigi

I have been asked to send in more info from my tax return for 09/10 today :eek:

My earnings were very low so they do not undertstand how I can afford to live, I never informed them by partner pays most bills.....didnt know I had to!

I have to send in all my personal bank statments ect, plus an expenditure form, can anyone tell me, the figures on the expenditure form I need to do.......does this include all my personal outgoings too? or just business related

Any Advice you can throw my way please :j

Mouse1812

How do you know "they do not undertstand how I can afford to live" ? I have never seen an enquiry (investigation) opened with that kind of comment/justifiaction. What exactly have they said?

Do you have a separate business bank account, or is it all mixed up with a personal one? HMRC are known for asking for things which they should not, and until such time as they have "broken" the business accounts the personal ones should remain off limits.

jimmo

If you are subject to an HMRC Enquiry you seriously need to think about whether you can handle this yourself with help from a bunch of anonymous posters on a forum or you need a professional.
In my latter days at HMRC we imposed 30 day time limits for replies to Enquiries so you don’t have much time to get your act together.
Also, from my time at HMRC, an Enquiry purely based on low profits / drawings was pretty unusual unless the pre-enquiry background checks were pretty horrendous.
I could be completely wrong but my gut feeling is that HMRC have at least a snippet of information which doesn’t sit comfortably with what they already know about you and your partner and your lifestyle.
One way or another you will probably have to face probing questions into your private life and how you can afford to live it.
I don’t mind asking the questions as long as you don’t take offence when I ask them but I have to say that you, and your OH, spending half an hour with an accountant would probably suit you better.

askabigail

If this is a true Code 8 investigation it could cost a lot of money (which you cannot reclaim) hiring a Tax Accountant to audit your financial affairs.

As Jimmo quite rightly states - act quickly and honestly.

jimmo wrote: »

If you are subject to an HMRC Enquiry you seriously need to think about whether you can handle this yourself with help from a bunch of anonymous posters on a forum or you need a professional.
In my latter days at HMRC we imposed 30 day time limits for replies to Enquiries so you don’t have much time to get your act together.
Also, from my time at HMRC, an Enquiry purely based on low profits / drawings was pretty unusual unless the pre-enquiry background checks were pretty horrendous.
I could be completely wrong but my gut feeling is that HMRC have at least a snippet of information which doesn’t sit comfortably with what they already know about you and your partner and your lifestyle.
One way or another you will probably have to face probing questions into your private life and how you can afford to live it.
I don’t mind asking the questions as long as you don’t take offence when I ask them but I have to say that you, and your OH, spending half an hour with an accountant would probably suit you better.

PlutoinCapricorn

There are two boxes that you can use when completing your return: one is for your affairs in general and one is for your self employment.

I have on occasion put something in the boxes e.g. can live on a low income because of low overheads, mortgage paid off, savings etc. and that the self employment income was a bit low this year because of illness. I did this in the hope of avoiding possible questions from HMRC.

It is possible that they do random checks and that you have been selected for one.

tigi

Thank you all so much :
OK Mouse 1812, the statment says : "I have questions over your ability to meet all your private & personal expenditure from your business profits I therefore would like to see any bank stamentments and counterfoils from all your personal banking, investments and charge cards".
I do not have a business account so I can only send in my personal statments.

Jimmo; I dont know what a snippet they would have about me, I live within my means, I just never informed them I live with a partner, my return for that year was very low due to the illness and death on my mother, maybe it was just too low? I have all my invoices and my statements have nothing to hide, they have given me 2 months to get everything together so I have time to go to an accountant if need be, but I was thinking to jst send it all in, only thing I never kept was my cc statments as I didnt know they related to my income, I never use them for business.

Jimmo, they asked for an statement of income and expenditure, do I have to list things like shopping, electric, ect? just in case I give it a go myself.

Thanks again

tigi

Ps, the investigation is under section 9A.............if this means anything to anyone!

chrismac1

Section 9A Taxes Management Act 1970. This is a standard enquiry, it's one of those times when having a business account is useful as that can potentially restrict the amount of information you hand over. In your shoes I'd find someone locally who has some experience of this sort of thing and willing to do it for a reasonable fee. It may be worth a quick phone call - my last "tax enquiry" was into PAYE avoidance in a dance school. We rang them up to ask the reason, they said "false self-employment".

I nearly fell off my chair! I said "My client has 23 staff, all through PAYE, and paid you £17k in PAYE and NI last tax year." She said "Oh! Did you?" The following day she rang to cancel the whole thing, and saved the taxpayer the expense of a 200 mile round trip for two HMRC employees. Meanwhile I have several clients who I strongly suspect have been under-declaring for at least 5 years, who appear to have lifestyles beyond the means on their returns. They've not had a sniff of an enquiry of any sort.

So if you can't think of a reason, call them up and explain. They might have mixed you up with someone else, it happens! OK that might be a 10% shot but a 10% shot at getting the dogs called off is worth it. Assuming that doesn't work I think you need help, it's easy to say the wrong thing quite inoccently if you don't know what they're driving at.

tigi

Thank You Chrismac1,
I think I will give them a call, its awful you know you havent done anything wrong, then you start looking at all your statments thinking, omg I a going to get into trouble for living beyond my means at times ((((

jimmo

tigi wrote: »

"I have questions over your ability to meet all your private & personal expenditure from your business profits I therefore would like to see any bank stamentments and counterfoils from all your personal banking, investments and charge cards"/QUOTE]

I have to say that’s a new one to me.
In my days at HMRC someone appearing to live beyond their income would certainly have been a risk factor but not something we would open an Enquiry with..
Going back to when tax offices really were local I always had a pretty good idea about your neighbourhood and the size and type of house you lived in. If I thought it appropriate, I could also get details of the cars registered at your address as well as a few other bits and bobs.
However, just like Mouse 1812 says, the enquiry would, in the first instance be about your business and only if I could “break” your business records would I be able to start delving into your personal finances.
As has been said many times on this forum, the taxman is entitled to see your business records only when enquiring into your business, but your business records have to include any bank accounts in which there have been business transactions.
So in your case, as you do not have a business bank account, your personal bank account is fair game for the taxman.
By the way, askabigail mentioned “Code 8”. Don’t worry about that too much. Code of Practice 8 Investigations are really heavyweight stuff where HMRC spends big money chasing huge amounts of suspected evasion and fraud. If you’re old enough to remember it, Lester Piggott did time for tax evasion bud Ken Dodd was found not guilty.
That was code 8. You are the far more routine Section 9A Enquiry. Nevertheless it can still be pretty daunting stuff for you. When I did this sort of enquiry work for HMRC, I kept a box of tissues in the top drawer of my desk just to have them handy during interviews and they got used up pretty quickly.
When I actually got your business records it was most certainly not a cursory glance. I would literally spend days and days going through them with a fine toothed comb and in many ways the time spent on that gives the taxman the tactical advantage. Not many people are prepared to pay their accountants to spend the equivalent amount of time preparing for the interview that will follow the HMRC review.
Having been retired for over 5 years I have to admit that the HMRC approach to you asking for personal bank and card records in the first instance is something I have never seen before but I have to admit that there were certain occasions when I would have loved being able to take such an approach so I am not exactly surprised by a new development.
On the other side of the coin, you might want to ask yourself why jimmo and chrismac 1 seem to be singing from the same song sheet. Jimmo is retired and could easily be out of date. Chrismac 1 is a practising accountant but doesn’t seem to understand how HMRC enquiry techniques are developing.
I like to think that I always gave my “enquiry subjects” an even break but a lot of my colleagues were far harsher than I was. I also like to think that a lot of “accountants” ripped their clients off but a few did an outstanding job.
Difficult isn’t it? Sadly, I think, there is probably no absolute answer.
One thing that could possibly help, who signed the letter from HMRC?
Grades change at HMRC but when I retired there were Assistant Compliance Officers, Compliance Officers and Higher Compliance Officers and knowing what level your particular enquiry is at could help.

Savvy_Sue

tigi wrote: »

the statment says : "I have questions over your ability to meet all your private & personal expenditure from your business profits I therefore would like to see any bank stamentments and counterfoils from all your personal banking, investments and charge cards".
I do not have a business account so I can only send in my personal statments.

Jimmo; I dont know what a snippet they would have about me, I live within my means, I just never informed them I live with a partner, my return for that year was very low due to the illness and death on my mother, maybe it was just too low?

Just a question, but would it be enough to return the form with a statement saying "I live with my partner who meets many of my household expenses from their income" be enough to get the dogs off? I'm guessing not, but I like 'simple'.

In the days when I had to do SA, my income was piddling, well below my personal allowance and low enough to make me exempt from NI, but no-one ever suggested I was living beyond my means. I had a better system: DH earned it, and I spent it!