- April 16, 2024
- Posted by: legaleseblogger
- Category: Related News
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### Situation Overview
Hi guys,
My 19-year-old brother has been using his current account for his small clothes reselling business he started 18 months ago. The business started off really well so I’ve been nagging him for months to actually register the business properly and set-up a business account.
He only got around to doing this a 2 weeks ago and has set up a limited company alongside a business account.
However, last week his NatWest have requested some information from him as large sums of money have been deposited and transferred.
### Concerns and Questions
He rung them today and was questioned about an additional £60,000 incomings minus his actual salary over the past 12 months. They also questioned individual transfers which he used to buy stock with.
To conclude the phone call, they requested his business spreadsheet of ins and outs and also his last 3 months pay slips.
Is he in danger of this information being passed onto HMRC thus having a significant tax bill?
Is it best to not provide the information and let them close the account?
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He has been honest and open and massively overlooked the importance of having a business account and paying taxes, but he’s only young and learning the ropes on the job.
Thanks in advance.
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Is he receiving the money as cash for his business and then depositing it in the bank? If so, its normal for the bank to request to know where the funds are coming from. He should already have his business expenditure and incomings recorded for his self assessment so just give the bank the records of that.
>Is he in danger of this information being passed onto HMRC thus having a significant tax bill?
This is a moot point because all financial institutes already provide the information to HMRC. HMRC will eventually request the same information that your bank currently is, regardless of whether you close the account or not. Why would he be in danger of having a higher tax bill? he only pays the tax that he owes, unless his business isnt legitimate or he’s hiding something in which case he better call saul lol
Also it doesnt matter if he’s using a personal or business bank account, as a sole trader it honestly doesnt make that much of a difference until you can reap the benefits of a LTD, 2 prominent reasons imo would be getting paid in dividends or protecting your personal assets incase the business goes wrong (though the later shouldnt matter if the business is evergreen and you dont take on debt to grow/run).
Also to add, once his revenue goes over 85k annually (90k for 24-25), he also has to register for VAT.
Did he do his self assessment for 22-23? If not then I’d definitely advise to speak to an account for filling in his first tax year since based on the above quote from you that makes it seem like you both dont really know what is due and what isnt, most good accountants will more than make up for it in terms of savings you could claim for.