A SINGLE PAYMENT COULD OPEN YOUR PERSONAL ACCOUNTS TO THE TAXMANMar. 13, 2013, 11:08am
‘You have nothing to fear if you have been honest’ HMRC may tell you but what would your personal bank account tell a tax inspector? The shocking truth is that a single payment made from your private account to pay for a business expense could be all it takes for an inspector to justify taking a closer look.
Tax inspectors have the power to carry out their investigations without impediment and request private statements to study. Any unexplained credits to the account, which cannot be supported by evidence, could lead to a tax assessment and ultimately a tribunal.
Business bank records are regarded as statutory records and must be retained; however there is no legal requirement to preserve private statements. If investigated this could make it difficult to find satisfactory evidence to support credits, especially after a significant period of time.
So when do private statements become statutory records? If a personal account is used to pay or make a number of business transactions, such as expenses, it could be regarded as a statutory record. If a personal account has been used it is highly recommended to retain satisfactory evidence to show a clear and concise paper trail.
How to do you avoid the tax inspector taking a microscope to your private bank records? Quite simply ensure your personal accounts are separate from any business banking. If necessary create a cash float for expenses or ensure all transactions are solely related to the business account.
For more information about statutory records, tax assessments and tribunals contact Tindle’s on 01642 878555 or visit www.tindles.co.uk.