< Go Back FTT call time on HMRC's Fishing Trip through a Directors personal Bank Statements Posted: Sep 13, 2019 Perfectos Printing Inks Ltd, Perfectos Printing Inks Group Ltd & Dr John Price v HMRC  TC7203
First Tier Tax Tribunal (FTT) decided an extensive check of a director’s personal bank
statements was not reasonably required for the purposes of checking his
personal tax liability or that of his company.
HMRC had opened enquiries into Mr Price and his companies as they often do in such circumstances.
The enquiries were ongoing for a long time; the taxpayers eventually made applications to the FTT for
Closure notices to be issued and, in addition, Mr Price also objected to a Schedule 36 Information Notice.
Dr Price received a payment of £711,618 from Perfectos HK a Hong
Kong based company in which he is a director and controlling
shareholder. HMRC were investigating if this sum could be caught under the s455 Corporation Tax Act 2010 legislation as a close company loan to a participator or if it was a distribution of profits HMRC demanded to see his personal bank statements and obtain details about any beneficial loan. Dr Price provided copies of his personal bank statements,
redacting some balances, the final page of the year was missing. HMRC requested unredacted bank statements. Dr Price appealed their additional request and applied for a closure notice requiring HMRC to end the enquiry into his affairs
It was argued that as no tax liability would accrue
to Dr Price under s. 455 of the Corporation Tax Act 2010 so there was no
reason to examine his personal bankings but HMRC argued that the loan might be a distribution of profit and might be be disguised remuneration (see Part 7A of
the ITEPA 2003).
The Appellants argued the dividing line of what was reasonably
required, when it came to the provision of personal bank statements, as
demonstrated in other relevant decisions lay somewhere between where
the officer could clearly show a justifiable reason to suspect under-assessment and where the officer was simply on a “fishing expedition”. This broad proposition
was not challenged by the Respondents and the judge described it as "
The FTT found that Dr Price had provided copies of his personal bank
statements and it was satisfied that no further information was therefore required
from him. The judge went on to say "
I cannot see why the Respondents require to know what
Dr Price chooses to spend his money on given that the latter’s means
are not in issue…." Adding that " Perfectos HK is a separate legal entity
and questions about how it chooses to record the transaction are
questions for its board and not Dr Price."
The FTT also agreed to the application for a Closure Notice on the basis that HMRC had
enough information as a result of its enquiries to raise an assessment if it sought fit to do so.
The above case shows that there are indeed 'checks and balances' to HMRC's semingly endless powers and, every now and again, HMRC need to be reminded of the limitations of their powers in appropriate circumstances. This case follows hot on the heels of their mauling for raising assessments "i
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