Enormous HMRC Fines

Enormous HMRC Fines

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A relative is having some huge (self-created) issues with HMRC, and I don't really know how to help them. 

Basically, they have always been self employed, and typically never earned much over £12,000/pa from doing odd-jobs for cash. Whilst they used to keep books and submit tax returns, a number of years ago they became a full time carer for an older relative. 

When that occured, they dropped to earning even less from even fewer jobs - perhaps £4-6k/pa, due to how much time was spent caring for the relative. They were living rent and expense free with the older relative due to being a full time carer - so didn't really need much money to live on. They knew they wouldn't owe any tax due to the amount they earned being so small and infrequent. 

Here comes the self inflicted part. They receive their "your tax return is due" letter, and for whatever reason, they don't get round to it. Then they receive the notifications that they now owe penalties for not filing/filing late - and either out of fear that they couldn't afford the fines or simply not having any of the necessary evidence to actually submit a return, they ignore it... And then ignore every single letter sent to them by HMRC about late filing fees, penalties, etc. for YEARS. They don't have a bank account with any money in it, because they manage the elderly relatives account for household expenses, and don't earn anything other than a few quid here and there for odd-jobs which they use for anything else. 

Fast forward, and they (despite not earning more than £6k/pa for the duration of the years they've failed to file) has racked up somewhere in the region of £12k worth of fines and penalties for late/no filing... and finally HMRC have caught up with them and are obviously making demands.

Putting aside the fact that this person is absolutely in the wrong for having not filed tax returns or responded in any way to attempts to resolve this issue sooner - I have to ask... Is it reasonable to have an amount in fines etc. be so high, given that if this person *had* filed their taxes, none would have been due?

Is there anything that could be done to argue this to their benefit? Even if they did have any books/records of the money they received, it was such little amounts that they didn't even put it into bank accounts - so we have literally no way of evidencing the fact that they earned so little other than the fact that they had a bank account with absolutely no incoming funds. 

Is there anything that can be done at all? Are they just going to have to bite the bullet and swallow the fine? They're shortly coming into an inheritance (the elderly relative they cared for has died) that could cover the full cost of the fines, but they now need that money to live on since they are no longer able to live with that relative rent and expense free. 

I would very much appreciate any advice on the subject, I can't find anything online that discusses late filing beyond 1 year - so I have no idea how 1+ year charges accumalate or what could be done in instances where the issues have gone on for so long... And given their situation, they don't exactly have the spare cash to consult a solicitor/specialist. I'm happy to help then with this financially if there is something that could be done to reduce the fine amount etc. but I'd rather know whether they ought to just bite the bullet and pay up our of their inheritance.

 

Replies (5)

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By SteveHa
12th Sep 2016 16:09

You could attempt to have the Returns withdrawn if there is definitely no liability, since in those circumstances the notification requirements of S.7 would not be met, but it could be a hard sell to the Revenue.

Alternative if HMRC refuse is to prepare Returns on the basis of best estimates where info not available, and then appeal the penalties on the grounds that they are disproportionate.

I don't think you'll get away with reasonable excuse, but worth throwing it in with any appeal, it certainly can't hurt.

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By arualx
12th Sep 2016 16:16

Thank you so much for this very helpful response. I wonder if I could encroach on you further, and ask that you explain a little more what "notification requirements of S.7 would not be met" refers to?

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Worm
By TheLambtonWorm
12th Sep 2016 16:58

Tell them to seek the services an accountant.

A solicitor or specialist accountant is not needed - just a run of the mill experienced practice accountant should do.

I'm reasonably confident that they wont need to pay anywhere near £12k once it's sorted, provided the accountant is decent.

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By Tim Vane
12th Sep 2016 18:30

I agree with worm boy. This is a fairly common scenario and any decent accountant will be able to deal with most of this for a reasonable cost. The important thing is not to try and wing it on behalf of your relative if you are not experienced in dealing with HMRC - a common mistake is to assume that HMRC know what they are talking about - the likelihood is that most of the staff you would deal with are just following a script and you need to hammer them down until you get to one of the small number of people that know what they are doing and are able to do something about it.

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By Marion Hayes
12th Sep 2016 18:56

Talk to Taxaid. They have the most experience here.
I don't think they will cancel the returns as there was some self employment but it is worth trying.
Failing that file nil returns based on best estimates. If they claimed carers allowance they will have given income details in the claim process so talk to that department as it would at least give some topical evidence.
If they are now elderly you could talk to TOPS ( Taxhelp for Older People) and I believe there is an equivalent legal helpline someone should have the number for.

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