Nick Morgan warns that HMRC are allegedly demanding personal financial records from business people, without proper grounds for suspicion. He also notes that section CH223430 (from the investigators' handbook) has been dropped.
Section CH223430 tells inspectors that they need to find something significantly wrong, questionable or suspicious in a business's record (ie they need to 'break' the record) before they can demand personal financial details from an owner or director of that business.
However, Morgan quotes Mark Morton, head of tax at Mercia Group:
"I am increasingly coming across requests for private bank details in opening letters. In early meetings the Revenue has focused purely on private affairs."
Anne Eager, enquiries manager at Robert James Partnership, is also quoted:
"I have had requests for private bank records from my clients in opening letters. When I challenged the request, the inspector said that it was to save time, as he felt it was very likely there would be issues with the records.
He added it was a 'standard approach' under the new regime."
In other words HMRC are indulging themselves in fishing trips into people's private bank records. Once HMRC have access to those records every payment into the account would be under suspicion, and it would be for the taxpayer to prove that the payments in do not constitute taxable income.
How would a taxpayer prove, for example, that money paid in for a friend's share of a social non business related dinner was not taxable income?
HMRC claim that Section CH223430 will return.
Why has it disappeared then?
Tax does have to be taxing.
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