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HMRC internal manual

Enquiry Manual

Recalculating Profits: Private Expenditure: Cash from Undisclosed Takings

Where takings or profits have been understated, you may find that part, at least, of any undisclosed cash takings has been spent and cannot, therefore, be used to account for savings. It is unlikely that the taxpayer will have saved all undisclosed cash takings and not spent any. Similarly, it is possible that the cash drawings shown in the supporting records or accounts (that is, drawings from disclosed takings) are used wholly for spending, and are not available for saving. The cash content of the total figure for personal and private expenditure will, therefore, consist of the whole of the disclosed cash drawings plus what has been spent out of the undisclosed takings.

Even where the Return figure appears to be based on contemporaneous records, you should consider whether the nature of the trade or business is such that there are opportunities for unrecorded cash transactions. Even where the business is said to be mainly cheque based, transactions may be settled in cash.

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