Akrill v HMRC – Personal Bank Statements Can Be Statutory Records
The First-tier Tribunal has held that a taxpayer’s statutory records can include statements from a personal bank account when the account is used for business purposes. As a result, the Tribunal upheld HMRC’s notice to request these statements.
- HMRC have the power to request the production of information or a document in order to check a taxpayer’s tax position.
- Mr Akrill (the Taxpayer) appealed against an information notice issued to him by HMRC requesting that he was to supply bank statements for a particular account for the period 1 December 2009 to 31 August 2015.
- There is a right to appeal against information notices however this right is removed when the documents requested form a ‘part of the taxpayer’s statutory records’.
- Statutory records are deemed to be information or documents which a taxpayer is required to keep and preserve under or by virtue of the Taxes Acts or any other enactment relating to a tax (subject to certain exceptions).
- The Taxes Acts are varied however in this case both parties referred to those relating to VAT, as this was the main tax at issue. The record keeping requirements referred to in particular were:
- The requirement to keep business and accounting records under Regulation 31(1)(a) of SI 1995/2518; and
- Paragraph 2.3 of HMRC’s VAT Notice 700/21 which states that their view of business records is wide and includes bank statements, annual accounts, orders, invoices, etc.
The primary argument of the Taxpayer’s counsel was that the bank account in question was predominantly used for personal banking except for:
- the receipt of VAT repayments from HMRC (this was the account the Taxpayer gave HMRC when registering for VAT in 2015); and
- the making of loans to his various different companies and the repayment of these loans.
Citing Beckwith v HMRC, the Taxpayer’s counsel therefore asserted that the account was not an operational part of the business as it was only used for two classes of payment. It should therefore not form part of the business’ statutory records.
HMRC contended that the bank account was nominated as the account for VAT repayments by the taxpayer and, notwithstanding that the business was set up in 2006, the Taxpayer could have set up a different account to make and receive VAT payments. Since he had not done this, the only account HMRC was aware of in relation to his business was the account in question.
Whilst the Tribunal accepted that an account used purely for personal expenditure was not a business record, the account in question was not used purely for personal expenditure.
The Tribunal held that the notification of the account to HMRC and the receipt of VAT repayments, combined with the failure to notify an appropriate business account, were sufficient to render the bank statements statutory records.
On this basis, the bank statements were deemed statutory records and the Taxpayer’s appeal was dismissed.
Though not influencing the Tribunal’s decision, it was also held that the investment of money from the account was an allocation of resources and a choice of where to invest. Such investments do not share the same qualities as business payments and so an account used for personal transactions and occasional injections of funds would not be deemed a business record.