EM1900 - Working an Enquiry: No Evidence of Taxable Source
Sometimes you hold information which indicates that the
taxpayer has capital, but there is no obvious source and the
taxpayer either fails to admit to any source, or provides an
explanation which you are not able to accept.
If after critical examination of the taxpayer's bank accounts
for any indication of a source and also any local information you
think might be appropriate, you still draw a blank, the table below
tells you what you can do.
Circumstances |
Action |
| The taxpayer is assessed under Income Tax (Trading & Other Income) Act 2005 or is a director of a close company | You should assume that the source of the capital is the business or profession, unless you are convinced that would have been impossible |
| The taxpayer is married to or lives with someone who is assessed under Income Tax (Trading & Other Income) Act 2005 or is a director of a close company | You should assume that the source of the capital is gifts from that person, unless you are convinced that would be impossible. You should review the business persons or director’s file to decide whether or not such gifts could have originated from declared profits. |
| You are unable to attach the capital to a business or professional source, and the taxpayer has failed to produce an argument which you can reasonably accept to explain the capital. | You should consider making discovery assessments under an appropriate general heading and/or including a suitable amount in an enquiry closure amendment. |
Before making assessments or closure amendments you should
take into account:
- how the capital came to light in the first instance
- the taxpayer's co-operation in the course of your enquiry
- the taxpayer's explanation (or failure to explain) the source of capital, and the quality of any evidence he or she has put forward
- whether or not the taxpayer has the opportunity, time, skills etc to have the source of income.
Further guidance on this question must be obtained see contact link, before assessments are raised under a general heading where there is no clear source for the profits on gains.
