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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Recalculating Profits: Statement of Assets and Liabilities - General

Once you have established that the taxpayer’s profits have been understated, you should request a statement of assets and liabilities. To be of use, the statement must contain all assets and liabilities of significant value, including

  • those of his or her minor or dependent children
  • those held by nominees
  • those held otherwise on his or her behalf
  • those held outside the United Kingdom.

You should make sure that the taxpayer is aware of the importance of the completeness and accuracy of the statement. You should ask them to sign and date it. The statement should refer clearly to the date on which the assets listed were held.

You should not compile the statement of assets, but should leave it to the taxpayer or agent. If you do assist the taxpayer in drafting the statement, you must tell them that they remain responsible for its accuracy. You should record what you have said in a note of interview, or, better still, send the taxpayer a letter pointing it out.

If a statement is subsequently found to be false EM3820+, it will obviously undermine the credibility of other statements made by the taxpayer and would be viewed as a serious offence.

You should normally ask the taxpayer for a statement of assets and liabilities that reflects the position at the end of the accounting period or return period under enquiry. This will normally be sufficient to enable you to establish the level of assets held, and confirm your conclusion about

  • the level of omissions, and
  • their ability to fund a settlement.

Alternatively, it may be sufficient and easier for the taxpayer to provide you with a statement of assets and liabilities at the present time. If means are an issue you will need a statement at the present time, to decide whether we can accept a substandard offer. If you are preparing a detailed means test you may also need a statement that shows the position at the beginning of the accounting period.

Where you are proceeding by way of capital statements EM3580+, you will not need formal statements of assets, but you should ask the taxpayer to certify that the assets and liabilities included in the capital statement schedules are complete and correct.

You must review the statements of assets carefully on receipt. Occasionally, a statement of assets will reveal the existence of assets that are generating undeclared income (for example a let property).

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Form MS 142 is available to assist taxpayers who have been asked to supply a statement of assets and liabilities. You can find this form in SEES forms and letters. It serves as an aide-memoire by listing the most commonly held assets. The list on the form is not comprehensive and the taxpayer is responsible for ensuring that the statement is complete.

If the taxpayer fails to supply a statement of assets and liabilities on request, you can require this information under FA08/Sch36/Para1, see CH23000+. You cannot however use information powers to insist that taxpayers bind themselves to a certified statement of assets and liabilities. If you need to issue a Schedule 36 notice you should refer on the list of information and documents required to ‘a statement of assets and liabilities at the specified date’ rather than ‘form MS142 issued on the specified date’.

There is more guidance about statements of assets and liabilities in the section on concluding the enquiry, see EM3805.