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HMRC internal manual

Enquiry Manual

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HM Revenue & Customs
Updated
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Recalculating Profits: Personal and Private Expenditure: Onus on Taxpayer to Supply Figures

Normally, you should discuss personal and private expenditure with the taxpayer yourself. Fact finding through a third party, including an agent, can add to the time required and increases the risk of misunderstanding.

You should try to discuss personal and private expenditure as soon as possible after you realise the subject needs to be considered. What you want are facts. The facts must come from the taxpayer, and, if all parties are willing, their spouse, civil partner or domestic partner, see EM3651.

The taxpayer is the only person who knows the true figures and is therefore in the best position to supply these.

You should not try to suggest exact amounts. If prompting is required ask what is currently spent each week or month. Once the taxpayer has given you a figure, you can ask questions, comment or criticise.

There may have been discussions between the taxpayer and their accountant about the scale of private expenditure. However it is up to you to be satisfied with any estimates which are put forward. You should not simply accept the accountant’s statement that they are satisfied that the figure returned, or provided now, is correct.

You have reason to test the adequacy of the recorded figure of drawings if the drawings are wholly or partly a balancing figure in the supporting accounts, or if the business records are shown to be unreliable, or if in the course of your enquiry you have, for example, established other undisclosed savings, or a generally unsatisfactory capital position.