Aunt Betty’s Cash Gift

It is widely reported that government ministers are seeking access to the bank details of virtually everyone in the country. The reason given is to crack down on welfare system fraud. (Really? I can think of a wider application.)

In most tax investigations the inspector will ask to see bank statements. He will trawl the transactions to see if they tie in with the items reported on tax returns and will also extrapolate figures to build up a picture of lifestyle to see if it matches the income declared.

A standard technique in defending a tax enquiry is to offer business bank account statements – which are required – but withhold personal statements, on the basis that they are nothing to do with the tax return. Why? Well, when the inspector gets hold of personal bank statements you need to start explaining about the birthday gift of a £200 cheque from Aunt Betty……….. the tax inspector’s figures then become a mountain of supposition based on a molehill of fact and, frankly, it’s a lot of work trying to prove the inspector wrong.

Let me ask you – can you remember what that bank receipt of £113 dated June 17, 2008 related to? No, neither can I, but the tax inspector will want to know.

It’s fine keeping good business records but there’s no need to do the same for personal bank accounts, so we don’t. – Next time, ask Aunt Betty for cash



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