Tax Enquiry - Undisclosed Bank Accounts

[Aybe]

We are in the course of responding to a HMRC Enquiry into one of our clients, which has widened from an initial Enquiry into a 2003 Tax Return for the clientÂ’s wife to 2003 AND 2004 for the wife, the husband, and their limited company.

The initial enquiry seems to have come about because the wife had registered savings accounts held in her name for gross interest (where she was not entitled do so as her total income in the year exceeded the PA). During the course of responding to the Enquiry, our client has now disclosed the operation of additional accounts that we had previously not known about.

Our client has told us that he was not trying to evade tax through the operation of these accounts, but that he had not realised quite how much money was accumulating over a period of over 4 years as a consequence of ongoing personal circumstances (he and his wife suffered family bereavements and illnesses over this period). The monies have not been spent, and largely remain in the account, but we do not believe that the clients personal circumstances were a valid reason for not disclosing

The cumulative amounts of money deposited in the various accounts from business activities is a significant amount (averaging £125k pa). We have advised our client that he has no option but to make a full and complete disclosure to the Inspector, and that he is likely to face serious financial penalties on top of the tax/VAT which will now fall due.


It is not clear if HMRC are yet aware of these additional accounts as their latest Enquiry letter was simply requesting “routine” information, and raising the expected queries in respect of documents previously submitted. We are currently in the process of trying to reconstruct the movement of money into/between the accounts to ascertain the likely tax bill. We are then proposing to inform the Inspector of our findings, but are not sure of their likely response.

This situation is not one that we have come across before given the size of the monies involved, and the circumstances surrounding the additional accounts. We would be interested to hear from anyone who may have had to deal with anything of a similar nature.

[amccann@dtegroup.com]

Your advice to your client is correct.I full disclosure is now required.
The work you are carrying out re the past is also correct.
I spend a lot of my time advising other practices in this type of situation and it is likely a full enquiry will be considered by HMRC and penalties will be levied.
If you wish to chat through please give me a call on 0161 767 1291.
Alan McCann CTA ATT
Director of Tax
DTE Taxation Services

[Sherlock]

This case is large and serious enough to warrant specialist advice, and I would instruct Alan or another reputable tax investigations consultant.