Do banks inform HMRC about business and personal financial activity?
Posted 05 Feb 16
If you want to run a successful business, you will make sure all your financial matters are taken care of. One of the ways which makes it simple to keep a track of your business earnings and expenses is opening a business bank account.
In previous articles we discussed the reasons why it is much more beneficial to keep your personal and business finances separate. If you would like to find out more about the benefits of a business bank account, contact our experts at Tawanda Accountants today.
One of the questions we are often asked by our clients is if banks inform HMRC about business and personal financial activity. The simple answer to this question is: yes. However, if there is no suspicious activity within your financial transactions, banks will have no reason to inform HMRC about it. The new government proposal could provide HMRC with the right to access even your personal bank accounts if you have unpaid taxes. This will affect only those who consciously avoid paying their taxes, so if you keep track of all the deadlines for tax and National Insurance payments and maintain all your documents and records safe and up-to-date, you have nothing to worry about.
If you are a self-employed individual, a director or a limited company, you will need to provide bank statements for annual accounts and tax returns by the deadlines set. Bank statements are one of the sets of documents you will need to provide evidence of your business activity, income and expenditure. HMRC might request the investigation of these records at any time.
However, it is possible for HMRC to proceed a random investigation or based on a specific project on business type in order to carry out risk analysis. This occurs when HMRC’s system identifies fluctuations in tax return figures. As a limited company, you might also need to submit to an audit, in which all your financial activity during a certain period of time will be a subject to a general review and analysis. In this case, HMRC will request bank statements from you.
If you run a business as a sole trader or a limited company, you should always keep your records and documents safe, up-to-date and ready for investigation at any time. The records and documents which constitute the basic evidence for your business activity include:
Details of sales and other business income
Details of purchases, costs and expenses
Order notes, delivery notes, invoices, paying-in-slips
Stock-take at the end of each accounting period
Bank and building society statements
Private money paid into or removed from a business bank account
Payments to employees
Annual accounts - details of assets, liabilities, income and expenditure for each financial year
PAYE and VAT records
Directors’ loan accounts
The best way to ensure that all your documents are kept safe and delivered to HMRC on time is by hiring a professional and certified accountant. At Tawanda Accountants we provide our clients with superior accounting and bookkeeping services and make sure you will never have to worry about a missed deadline or unfiled documents. Contact us today to find out more about how our offer can better your business.