HMRC compliance check - personal bank statements

chrismac1

The other important reason for not just yielding up information concerns the likely quality of person handling your enquiry. Going back 20 years, if I was facing an enquiry I could be confident the Inland Revenue person would know more about the UK tax laws than me and have some sort of understanding of where to press hard and where any pressing would just give him or her a bloody nose.

Now I am very sorry to say there is every chance that you are in fact dealing with the village idiot wearing an HMRC staff badge and calling himself or herself a tax inspector. This means that they can aggressively pursue totally irrelevant things which have no possible bearing on a given tax liability, and frequently that is exactly how they behave. I am never really sure whether it is just utter lack of knowledge of UK tax laws, or a very low general IQ level.

So don't be giving them any bones to chew on other than bones they are legally entitled to.

Pennywise

chrismac1 wrote: »

Now I am very sorry to say there is every chance that you are in fact dealing with the village idiot wearing an HMRC staff badge and calling himself or herself a tax inspector. This means that they can aggressively pursue totally irrelevant things which have no possible bearing on a given tax liability, and frequently that is exactly how they behave. I am never really sure whether it is just utter lack of knowledge of UK tax laws, or a very low general IQ level.

Sadly, that's my experience too. But there's another angle which is the trainee inspectors who are "learning on the job" and seem to be given a random case to work a full inspection on for no valid reason except for improving their own knowledge and experience. This is totally out of order as it's just causing distress, wasted time and expense for the taxpayer.

Not so long ago, I took on a client who was in the midst of an HMRC enquiry re their limited company. It was a purely "fishing" expedition - HMRC had no grounds to doubt the validity of the company accounts/returns submitted. The client didn't have an accountant, so when they go the first HMRC letter asking for various "innocent" bits of information & analyses, they went along with it and provided everything asked for. Despite none of that throwing up any red flags to HMRC, the "inspector" then wrote back asking for even more information, paperwork etc. This time, the client was a bit more reluctant, and phoned up the "inspector" but was abruptly told that "HMRC had the powers" blah, blah, so spent hours getting a big pile of paperwork together to post to HMRC. Then, they got another letter asking for the private bank statements and private credit card statements - again, absolutely no reasons given and nothing to suggest anything untoward. The client provided it all again as they genuinely thought HMRC had the right.

Then, the killer letter came from the inspector with a list of transactions on the private bank account which HMRC wanted explaining and supporting paperwork provided. These included a handful of trivial cheques paid in, such as a tenner here and £25 there - totalled no more than a couple of hundred pounds. More stupidly, there was a 1p transfer from another bank account which HMRC highlighted and wanted to see all the bank statements from that account too. Then a list of cheques out for which he wanted the cheque book stubs and the paperwork/explanation for each (remember this is a personal bank account and not the company bank account and no company transactions had been put through that personal account!).

That's the stage when the client had had enough and engaged me to sort it out. I looked through all the paperwork from both sides and quickly realised the inspector didn't know what he was doing and was just fishing, and therefore completely outside the scope of HMRC powers. I just ignored him and wrote a brief complaint to the manager outlining how helpful the client had been, how there were absolutely no grounds for the enquiry to continue and insisting on closure within 14 days otherwise I'd take the case to the commissioners for closure. I got a closure notice the following week!

Don't put up with it.

bowlhead99

Pennywise wrote: »

You could say that about every adult in the UK. I don't think the average Joe Bloggs would take too kindly to HMRC requesting personal bank statements from 4 years ago just to prove you weren't running a sole trader business. Would you happily do it if HMRC asked you? Let's face it, HMRC don't know that you were running a side business and not declaring it either!

Well, the average person hasn't incorporated a company with themselves as shareholder and director (which is not something one does completely at random on a whim without an intent to do business, as it's not free and involves companies law compliance) and then later strike off that company without apparently doing anything with it.

So, while I and every average adult in the UK would be surprised and shocked if HMRC asked if we'd mind digging out our bank statements to help prove that we weren't running a business, that shock and surprise would stem from the fact that HMRC would have had no reason whatsoever to think that we were the type of people that would even dream of trying to run any kind of owner-managed business.

Whereas, clearly, the OP did want to run a business and went so far as incurring the time and costs and ongoing obligations of creating a corporate entity through which they could transact that business.

So, it seems a little disingenuous to say "HMRC have no inkling that this person wanted to run their own business, or was likely to have run a business or received any form of self employed income, how would you feel if they enquired about your financial situation and whether you ever got a business off the ground or received or business income into personal accounts". I and the general public don't have any history of creating and shuttering companies as owner-director in the last few years, so we'd be pretty surprised about their idea that I should participate in a compliance check /fishing expedition to close the loop on potential business affairs.

I do agree with the other general points by you and the following poster about not opening up your affairs for ill-qualified numpties to play connect the dots in some harebrained way.

But the idea that "well, it's not right they should ask her for something if they wouldn't ask you for the same", is pretty wide of the mark, IMHO. How can you ever expect lawmakers or tax collectors to work efficiently following a risk-based approach if you are not allowed to differentiate between people and ask person A for something if you wouldn't also ask person B in entirely different circumstances, for the exact same thing.

Person B, and indeed the general population, do not have any indicators that there is anything to be curious about (in terms of income or other activities from a business that they wanted to create). The situation is *arguably* different for OP. So if the argument needs to be had, court or a tribunal is probably the place for it to establish what is reasonable.

dori2o

chrismac1 wrote: »

As the silly NI stuff last week and the pasty tax stuff show, when dealing with HMRC you can never rule out the pernicious effect of the Numpty Department. Clueless wallies who often do not even know much about UK tax lawsbut nonetheless are drafting such laws and conducting tax enquiries.

The vast majority of tax enquiries on my client base - I am an accountant - have been stupid and clueless beyond belief. For evidence, see my post from last month on the last enquiry I had. Overall HMRC have chased after over £250,000 in those enquiries, and achieved £67 - though in fairness I would have fought the £67 too but the client just could not be bothered.

Don't just offer up these statements.

Again, HMRC do NOT draft tax laws. They are set by HM Treasury.

chrismac1

Technically true. But our daft tax laws, like Making Tax Diabolical or sticking thermometers into Cornish pasties to see if it is 0% or 20% VAT, have the fingerprints of the Numpty Department of HMRC all over them.

LornaSw

Well I received my tax code this year and it had details of my bank account balances and I was never contacted nor did I give permission how can this happen without at least consultation

BoGoF

LornaSw wrote: »

Well I received my tax code this year and it had details of my bank account balances and I was never contacted nor did I give permission how can this happen without at least consultation

No it didn't.

It may have had details of taxable interest you received which the banks are required by law to provide to HMRC.

badmemory

BoGoF wrote: »

It may have had details of taxable interest you received which the banks are required by law to provide to HMRC.

And the next question is - were the figures right? Mine certainly weren't. An eighth of what they should have been. They don't want us to tell them anymore because they already know, but when they don't get it right it is our fault. Even if it makes no difference to the tax charged/paid we can still be fined. They changed the rules some time ago from no tax no penalty to make a mistake pay for it.


They have to get the money in from somewhere & we are an easy target.

LornaSw

No it actually had the exact details of what was in each of my accounts. Although I am a paye payer and they reduced my tax code to account for any interest tax which was very minimal there were no other discrepancies. When did the law change to allow this

Pennywise

What is the number on the bottom of the document - usually bottom left or maybe bottom right.