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Personal  bank statements can be business records

The First-tier Tribunal has confirmed that a taxpayer’s statutory records can include statements for a personal bank account if the account is used for business purposes. As a result, HMRC’s information notice requesting those statements was not appealable. Akrill v HMRC [2016] UKFTT 0550 (TC).

The First-tier Tribunal has confirmed that a taxpayer’s statutory records can include statements for personal bank accounts used for business purposes. Therefore, the taxpayer had no right of appeal against HMRC’s information notice.

Bank statement is a business recordHMRC may request statutory records under an information notice. Statutory records are information and documents that taxpayers must keep under tax legislation (paragraph 62, Schedule 36, Finance Act 2008). For VAT purposes, this includes business records, such as bank statements. While HMRC requests for “non-business” records are subject to appeal, taxpayers have no right of appeal where statutory records are requested (paragraph 29, Schedule 36, Finance Act 2008). HMRC information requests concerning “non-business” records, such as private bank accounts, are often disputed.

This decision highlights the importance of keeping personal and business transactions and accounts separate.

The tribunal did not accept that, following Beckwith v HMRC [2012] UKFTT 181 (TC), personal bank accounts could only be statutory records if they were an “operational part” of a business. It held that the taxpayer’s personal account bank statements were statutory records because VAT repayments relating to his business activities were paid into the account and it was the only account notified to HMRC (although the tribunal suggested that if a taxpayer only notified a personal account to HMRC but was always in a net VAT payment position, with payments made only from another (business) account, that might not render personal account statements statutory records).

Unsurprisingly, the tribunal commented that occasional transfers of funds from personal accounts into a taxpayer’s business would not themselves render statements for that account business records because such transfers were investments rather than business transactions.

Akrill v HMRC [2016] UKFTT 0550 (TC)

If you have any concerns about how this may affect you, please contact Angus Nicolson.

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