Hello,
Probably a common question but I couldn't find any ....
I've been speaking to a potential client who has been self-employed for about 5 or so years and never completed a tax return. He now needs tax returns to prove his income .....
I'm thinking I have no idea how to approach this so do not want to do the work (I'd quite like to watch someone experienced in this sort of area and learn from them though). Is there a type of specialist that helps these naughty people? Some google searching didn't bring up much apart from normal investigation specialists.
Or should I just do the work, if the standard thing is the common sense approach of getting him to phone up HMRC own up and then complete the missing returns as best as possible with the limited information available.
Any guidance would be much appreciated.
Replies (4)
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I had a similar case last year
I registered him for self assessment online (only four years though), got him to pay up front, did the work and filed all the outstanding returns within the three month window. Lots of late payment penalties but no real problems (fingers crossed)
Similar to razertoo, but
I aso had a prospect turn up and say that he hadn't done a tax return for years and he really ought to do something about it. I asked him why he hadn't been keeping up to date, expecting there to be something that might make me feel and bit warmer towards him (up to this point he had not been likeable). His reply was that he couldn't be bothered, so I showed him the door.
@TimCaprica: The part of your OP that worries me is that his sole purpose for speaking with you is that he needs something, perhaps to get a mortgage or a loan. No mention that he has, otherwise, had no intention whatsoever of paying tax. We have all been subsidising his dishonesty. What do you think of that?
Can you trust him to provide you with full and accurate information, are you and he prepared for other issues that might crawl from the woodwork eg. he should have registered for VAT years earlier? Can you trust him to allow you to file returns at the end of the day so that his tax liability is registered (beware of those that say, 'no, it's OK I'll do it myself, thanks'). Can you trust him to pay you the amount you are worth or will he contrive a fake 'falling out' once he has what he needs. Will he cut you off and then disappear until he has need of an accountant again (of course he wouldn't come back to you, would he)?
Better to make full disclosure to HMRC
Done this a few times with the work I do or a charity. Sometimes you just have to suspend judgement and give them the advice they need.
Simply filing tax returns for all open years, can be an option, but in most cases HMRC's hidden economy team will launch an enquiry, raise penalties for non-disclosure, and go back another couple of years. So your client would be sitting on tender hooks for a year waiting for the off chance the returns are not picked up. But given that non-disclosure is technically a criminal offence, they almost always are.
So in my experience, making full disclosure from the outset is the best option as it usually leads to smaller penalties and surety over the total extent of the debt from an early stage. And providing its a non-disclosed trade, HMRC usually only look to collect tax for the last 5 or 6 years.
From your perspective, I would reiterate what has previously been said, and maybe ask for payment on account for the work.
And given the criminality of non-disclosure you must also consider MLR. Even if he makes full disclosure, you may still have reporting obligation.