EM8211 - Companies: Enquiries into Directors and Participators: Information Requests

If a probable close link between the company and the private finances of its directors, such as apparent inadequate means, is an area of concern in the company enquiry this should be mentioned at the outset. When to ask for private accounts will depend upon the circumstances of the case but, where the private finances of director(s) of a close company is a particular cause for concern you can, taking care not to breach confidentiality, ask in your opening letter that the company asks its director(s) to let you have their private account statements. You should make it clear that these documents are being requested voluntarily and could not be included in a taxpayer notice under FA08/Sch36/Para1.

If a director’s return presents clear risks of its own, an enquiry into that return should be opened under TMA70/S9A.

Your letter opening the enquiry into a Director’s return should normally include a request for documents and/or information about the areas of their return into which you wish to enquire, and you should only extend your enquiries into other areas where concerns in those areas arise from your enquiries.

Where linked enquiries into the company and its directors have been opened it is important that documents and information are requested from the appropriate person, either the company or the director, to enable you to issue the correct notice under FA08/Sch36/Para1 should the information not be supplied voluntarily. Although you need to ensure that documents and information are requested from the appropriate person you can still, and should work the company and director enquiries together as far as is possible without breaching confidentiality of the directors’ personal affairs.

Information about directors’ personal financial and tax affairs, such as their bank account statements, required to check the company’s tax position cannot be obtained using FA08/Sch36/Para1. Similarly information that may be relevant to, say, CTA10/S455 liability of a company, cannot be obtained from a director using FA08/Sch36/Para1.

When an enquiry has been opened into a director’s return you should always use the information power at FA08/Sch36/Para1 to obtain information relating to those returns, just as you would for any other SA taxpayer. However, if the risks present in the director’s return are not sufficient to reasonably require a review of personal finances in relation to a Section 9A enquiry, the appropriate statutory power for requesting the directors’ private bank accounts for your company enquiry is FA08/Sch36/Para 2. Before using formal information powers you should normally give the taxpayer the opportunity to supply the required information voluntarily.

Where you need to examine the private financial accounts of a director to check that a company tax return is correct and complete, you should

• first ask the company to ask the director to supply them voluntarily
• next, consider issuing a taxpayer notice under FA08/Sch36/Para 1 to the director where a TMA70/S9A enquiry has been opened, or open an enquiry, if there are clear risks present in the director’s return for the private bank or building society accounts to be reasonably required EM2220+.
• finally, where that is not appropriate, or is not available because the time limits for opening an enquiry have expired or an enquiry has already been completed, consider issuing a third party notice under FA08/Sch36/Para 2 to the director to request any documents, which the director holds, and which you think may contain information relevant to the company’s tax liability.

Often most of the correspondence etc. is directed to the company or its agent, rather than to the individual directors. When requesting information, either voluntarily or by use of formal powers, care should be taken to ensure there is no breach of confidentiality, particularly where the same agent does not act for the company and a director.