EM3540 - Recalculating Profits: Statement of Assets and Liabilities: General

Once you have established that the taxpayer's profits are understated, you should seek a statement of assets and liabilities. To be of use, such a statement must contain all assets and liabilities of significant value, including

• those of his or her minor or dependent children
• those held by nominees
• those held otherwise on his or her behalf
• those held outside the United Kingdom.

You should ensure that the taxpayer is aware of the importance of the completeness and accuracy of the statement. He or she should sign and date it. The statement should refer clearly to the date on which the assets listed were held.

You should not compile the statement of assets, but should leave it to the taxpayer or agent. If you do assist the taxpayer in drafting the statement, you must tell the taxpayer that they remain responsible for its accuracy. Record what you have said in a note of interview, or, better still, send the taxpayer a letter pointing it out.

If a statement is subsequently found to be false EM3820+, it will obviously undermine the credibility of other statements made by the taxpayer and would be viewed as a serious offence.

You should normally call for a statement of assets and liabilities as at the end of the accounting period or return that was the subject of your full enquiry. This will often be sufficient to establish the level of assets held and confirm your conclusion about the level of omissions and the ability to fund a settlement.

Alternatively a statement of assets and liabilities at the present time may be sufficient and easier for the taxpayer to provide. A statement at this date would be needed if means are an issue in the level of the proposed settlement.

If you are preparing a detailed means test you will usually need a statement as at the beginning of the accounting period.

Where you are proceeding by way of capital statements EM3580+, you will not need formal statements of assets, but you should ask the taxpayer to certify that the assets and liabilities included in the schedules are complete and correct.

Statements of assets should be reviewed carefully on receipt. Occasionally, a statement of assets will reveal the existence of assets that are generating undeclared income (for example a let property).

(The text at this point has been withheld under the Code of Practice on Access to Government Information)

Form MS 142(IT) has been prepared to assist taxpayers who have been asked to supply a statement of assets and liabilities. It serves as an aide-memoire by listing the most commonly held assets. The form emphasises that the list is not comprehensive and that the taxpayer remains responsible for ensuring that the statement is complete.

If the taxpayer fails to supply a statement of assets and liabilities on request, you can require these particulars, normally under Section 19A, or under Section 20(1) EM2615. Note however that you cannot use formal information powers to insist that taxpayers bind themselves to a certified statement of assets and liabilities. If you need to issue a Section 19A notice etc you should refer on the list of particulars required to ‘a statement of assets and liabilities at (date)’ rather than ‘form MS142(IT) issued (date)’.

There is more about statements of assets and liabilities in the section on Concluding the Enquiry EM3805.