Hand them over!

This synopsis reviews the kind of information and documents a taxpayer is required to turn over if HMRC sends them an information notice request.

Taxpayers generally choose to avoid correspondence with HM Revenue and Customs (HMRC); nevertheless, it is rarely good news when this takes place!

It is not uncommon for HMRC to provide a notification needing a taxpayer to give info or create papers which HMRC considers are ‘fairly called for’ to inspect the return (FA 2008, Sch 36, para 1). Taxpayers have basic rights against HMRC’s information notices. Nevertheless, there is no right of appeal or contest if the details or record types are part of the taxpayer’s legal documents. So, what are ‘legal records’?

Information or documents belong to the taxpayer’s ‘legal records’ generally consist if the tax regulation requires the taxpayer to maintain them (FA 2008, Sch 36, para 62). For instance, there is a basic responsibility for an individual who submits tax returns to keep all such records as might be requisite for the objective of allowing them to make and deliver a correct and full return for the year or period. This is not specifically useful. Nevertheless, for self-employed taxpayers, presently, business records to be maintained include records of the following: (TMA 1970, s 12B( 3 )):.

Some commentators have actually revealed the view that financial institution bank statements do not make up legal documents for info notice purposes. Nevertheless, HMRC can be expected to test such an assertion, especially when it comes to business financial institution declarations, and it has actually done so successfully before the tax tribunal in the past.

Some property proprietors use their personal savings account to get rents and pay property expenses. This is not to be recommended. For instance, in Smith v Revenue and Customs [2015] UKFTT 200 (TC), the taxpayer obtained rental income but did not run different business and private financial institution (and bank card) accounts. The First-tier Tribunal (FTT) found that the info was reasonably needed and determined that the taxpayer needs to give the bank and credit card declarations, yet leaving out any kind of personal info. In Perring v Revenue and Customs [2021] UKFTT 110 (TC), the FTT held that the following developed part of the taxpayer’s legal records of a property rental business:.

However, the FTT in Perring likewise stated: “The source of financing is not pertinent to the computation of the rental business profits. It can only create part of the legal documents of the rental business in a year if the price of finance would certainly be a deductible item in that year.”.

Even if bank statements do not create part of a taxpayer’s statutory records, that does not always prevent HMRC from seeking accessibility to them, if those bank statements are ‘reasonably needed’ by HMRC for examining the taxpayer’s tax placement (or accumulating tax financial debt). Seeing Expert professional advice in these areas is highly suggested.