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Help - 10 years no tax return

I've been self-employed for ten years, since being made redundant in 2002 - in the first 2 years I was earning cz. £8k, living off savings, barely earning enough to heat the house, and I didn't file a tax return because I couldn't have afforded to pay it; things got slightly better the next couple of years, but I then had the fear of the back-taxes (and still unable to pay) to stop me filing a return; last 5 years I've been earning about £20k. I now have savings and can (probably) pay what I owe... I really want to clear this - but how do I start, and how bad are the penalties likely to be?

Obviously I'm going to get a lot of flak from you guys, and I deserve it, but any advice - and figures - much appreciated. 

Henry

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30th Jan 2012 00:29

Um

reaches for calculator

10 years, average income say £17,000 pa

average PA say £5,000 pa

average tax and NI about 28% pa

That will be about £33,600 before panalties and interest

Let's double it then

£67,200

Visa or Mastercard?

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30th Jan 2012 04:56

Go and find an accountant who will take this on. Regards Peter

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30th Jan 2012 07:37

Harsh there, Mouse?

I think doubling it is at the far end of the spectrum.  The tax is probably right, but don't forget that when people say "I make about £20K" this is often before expenses and that's one area an accountant can help you with.

Once each year is worked out, they will then charge you interest, but for the last 3 years this has been stuck at 3.5% and I assume it's the more recent years that are the highest of the liabilities.  But then once you add everything up, the Revenue can then charge you penalties of up to 100% of the liability.  But if you're coming clean, co-operating with them and the amounts are not huge (from their perspective) they won't go to those lengths.  

However even with my optimism, you're looking at £35-45K.

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By ashbee
30th Jan 2012 07:55

Thanks both - will HMRC cut me any breaks at all on fines for my voluntary disclosure?

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By ashbee
30th Jan 2012 07:57

aha - marion you answered me, thanks. 

Wish me luck! Want me to post my experience here once I'm done?

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30th Jan 2012 09:08

It has been said but I'll repeat it. Go to an accountant. Attempting to do it yourself will offer you up like a thethered goat to HMRC, who will have NO mercy. The accountants fees will pale into nothing compared to the misery HMRC will give you on your own

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30th Jan 2012 10:25

Like Bernard says

you do need an accountant, but make sure it's someone willing to cut corners and attack it with what's known as a broad brush approach.  You don't want someone who will spend months in getting every last figure right because that will cost a lot.  So long as you can get a reliable fix on what your income was in each year, a representative sample year of expenses may be acceptable to the Revenue. 

So get an accountant, but have a 10-15 minute chat on the phone about how they would approach it.

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30th Jan 2012 14:17

Enquiry

I think your figures will need to stand up to enquiry.....as after you have come clean HMRC are almost certainly likely to enquire.

Getting it right does not take much longer than guestimates but will show HMRC are you are prepared to put your house in order. This is a failure to notify and or prepare any returns and clearly deliberate not just a discovery projected back for years.

Why did you not take advantage of any of the tax amnesties ?

You need an accountant that's for sure...cheap as chips will not do you any favours either.

Coming clean is the best option.....will lower the penalties whatever they are...........there have been convictions and confiscation orders under the proceeds of crime for lesser amounts last year...and whilst unlikely in your case it does show how serious the matter is.

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30th Jan 2012 17:53

Harsh?

A bit curt maybe, sorry it was late. However I think the figures were actually quite close.

opens spreadsheet

matrix ten by ten

earnings from 8,000 up to 20,000 within five years, flat thereafter

Less PA for each year

Calculate tax and NI

ten years interest on year one (compound)

nine years interest on year two (compound)

etc

5% surcharges * 2 for each year (add interest)

£200 fixed penalties for each year (add interest)

Total; over £13,000. And that is before any “tax geared” penalties. 30% ? Another £10,000.

I think a total bill of £45,000 would be at the lower end of the range.

The advice about seeking an accountant is spot on, you must get professional advice for this. If you have any doubts about doing so, read this because you are firmly in “loose your house” territory.
 

 

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30th Jan 2012 19:54

I don't suppose there still remains any scope ...

... for opening an account in Liechtenstein?

With kind regards

Clint Westwood

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31st Jan 2012 09:58

for the rich only !!!

nogammonsinanundoubledgame wrote:

... for opening an account in Liechtenstein?

With kind regards

Clint Westwood

not my bag but...

I think you need at least £50K to open an account in liechtenstein ?

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By ACDWebb
30th Jan 2012 21:38

Not an electrician are you?

http://www.hmrc.gov.uk/ris/hmrc-campaigns.htm

Best bet as above is find an accountant, and yes voluntary disclosure will help somewhat

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By ashbee
30th Jan 2012 23:44

Mouse2007, your advice is unkind, hysterical, unhelpful and, as far as I can make out, legally illiterate. Thanks.

Everyone else, many thanks for your constructive and kind words. I have changed a plug in the course of my duties, so electrician it'll have to be...

H

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31st Jan 2012 08:47

In defence of Mouse

ashbee wrote:

Obviously I'm going to get a lot of flak from you guys, and I deserve it, but any advice - and figures - much appreciated.  

......

Mouse2007, your advice is unkind, hysterical, unhelpful and, as far as I can make out, legally illiterate. Thanks.

Everyone else, many thanks for your constructive and kind words. I have changed a plug in the course of my duties, so electrician it'll have to be...

H

Oh dear .... Mouse may have been a litle flippant, but gave good advice!

When you do get an accountant, please be totally honest and upfront with them. They will need the full facts if they are to give you the best help and advice.

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31st Jan 2012 02:22

You've paid no tax for 10 years

and you want me to be kind? Sorry, that does not quite cut it with me.

Your current status is: long term, well established, self confessed, tax

a)    avoider
b)    evader

which is it?

Now, tax evasion? well that's criminal territory, fact, and there’s nothing hysterical about making that small observation. Pussy footing around the issue is unhelpful, being bold enough to poke you in the eyes about it is not. Take offence if you like, if the truth hurts, well so be it.
    
You have a serious problem which needs rather urgent attention, sorry if you think that is unkind, hysterical or unhelpful, but if HMRC get to you before you get to them; then it's game over. There is nothing legally illiterate about that, you are potentially in criminal territory. A little step up from “loose your house”. It’s called “get to live somewhere else for a while”.

Indeed it’s my turn to be offended, I actually went out of my way to give you some figures (which you asked for) yet you think I am being unhelpful.

Sorry if you did not like the flippant presentation, sorry if you don’t like the “news” but you’re not in a pretty place right now. I prefer to be correct to cosy.

I did some calculations because I thought you needed to know the size of your problem. I have no idea if the numbers are a show stopper for you, but on the information given, I suspect they could be. In which case it could be an insolvency practitioner you need not some plodding accountant.

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17th Jul 2015 17:55

Help

I actually like your honesty, PLEASE, I have put a review on at the bottom, I would appreciate your honesty too.

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31st Jan 2012 09:39

legally illiterate ?

Interesting.....I assume you mean the interaction of tax geared late notification penalties and surcharges ?

How would you know this ?

Was this question just a game by another accountant I ask myself ?

In any case the finer details are usually worked through if you are actually doing the job !

As are the numbers.....

Did you read the case mouse showed you and I alluded to ?

Sorry but it is true a criminal offence has been committed (if it was real),..but HMRC usually deal with such matters using civil remedies....added to which we live in uncertain times as regards HMRC 's attitude to penalties and prosecutions.............

There is nothing wrong with the starting position Mouse assumed.

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31st Jan 2012 10:23

and class 2 NIC ??

even that has mounted up !

hope you did not reach the turnover threshold for vat !

or have children and claimed CTC's

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31st Jan 2012 10:42

@The Black Knight

Was this question just a game by another accountant I ask myself ? 

I wondered, too. I think this thread can go in the bag with the other tall stories, as far as I am concerned!

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By ashbee
31st Jan 2012 11:51

 

 

ShirleyM wrote:

Was this question just a game by another accountant I ask myself ?

I wondered, too. I think this thread can go in the bag with the other tall stories, as far as I am concerned!

Not a game, I promise. I felt that mouse was being a bully & a cassandra, and bringing up a £700k penalty for a £5k tax bill in this case was principally intended to cause distress. I do appreciate the contribution of everyone who took the time to read & post on this - thank you. 

H

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31st Jan 2012 12:31

You may not need to declare 10 years

- you may only need to go back further than 6 and it may be limited to just 4. It depends on the full facts and circumstances of your case and any mitigating factors.

So, you will need to take advice from someone in person. There is a charity, TaxAid who may be able to assist if you are stony broke. However, your income possibly exceeds their limits. You can also contact me and I will recommend you someone who is very experienced in these disclosures to assist, but you will be charged for the advice (invariably well worth the cost in these cases).

Virtual Tax Support for accountants and their clients: www.rossmartin.co.uk

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By Stee66
30th Jan 2013 13:34

Not paid tax for 7 years
I've been reading all these comments and I have to confess I'm in the same boat
I'm petrified but cannot go on like this
I have no savings and no way of laying what I owe
I work in the arts and have not earnt a lot, prob on average between 15-20k per year , sometimes less
How do I move forward
I know what I've done is wrong but its a cycle of denial and I want to come clean
Who can I talk to?

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31st Jan 2012 12:39

Kassandra

Condemned by Apollo to prophesy correctly but not to be believed.........Yep that's about right.....my mother gave me the wrong name it appears, seems to be a daily occurrence for me. LOL perhaps we should all re-badge as professional Cassandra's LOL

I am sure Mouse did not intend to cause distress.....like all prophesy it depends on your actions.

Sort it out and you will be all right......do nothing....and who knows ?

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By khalm0
31st Jan 2012 13:04

I have had a similar client and it was not as bad as you think. ultimately, the fines are fixed. the interest is fixed as a percentage. the main basis revolves around your profitibility that will determine the tax paid and the interest owed.

If you want to chat over the phone, please email me your number on [email protected].

 

It is only criminal if they come to you but if you go to them first, you need not fear on this part.

 

 

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Some further technical background

This may be an extreme example, but several other members encountered similar scenarios during January. Rebecca Benneyworth dealt with the penalty scenarios (and possible mitigation strategies) in our article What to do about multiple SA penalties

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03rd Feb 2012 11:10

link

Hi John the link is to the any answers page not Rebecca's article...

 

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03rd Feb 2012 12:04

Henry

I would suggest that rather than approaching an accountant as such you should get advice from someone who specialises in Revenue enquiries and knows how to cut a deal with them.  Any disclosure made by you will almost certainly result in an enquiry and because you are making a voluntary disclosure a negotiated settlement should be possible with a good penalty abatement given.  In this connection I understand that HMRC will be starting a campaign during the Spring to allow people in your situation to come clean and this would be a good time for you to make your disclosure at the same time mentioning that it is as a result of the campaign.

As to how much this will cost you you mention that you have some savings.  Assuming you deal with a reasonable inspector you could expect him to cut a deal which will see you losing all your savings and paying off the balance over a period of years.  A reasonable inspector will try to come to a figure which you will be able to pay and still survive but if you own property or other assets you might very well lose them.

Good luck

Steve 

 

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Have you got the money

Ashbee

I think mouse is right in all respects.  You may not like the way it was said but you asked and anticipated flak.  Do not expect sympathy either, you are the one who decided not to pay tax and still have not.  In making that choice you decided you were different to the majority of people who have no choice or have decide to recognise their obligations.  Most people are employed; lots minimum wage, what gives you the right to say you could not afford to pay tax.

Having got that off my chest.  The point here is how much do you have, how much can you raise, how much do you want to have it sorted out?  If you do not have the money put by, you cannot pay.  If the liability is way beyond your means, you cannot pay it. 

If you came to me, I would want a substantial payment of fees up front unless you could demonstrate means to pay your tax and to pay me.  I am trustee of a charity, I make donations to charity.  If you came through the door, I would not see you as being a charity case.

What I am saying is that if you do not have the wherewithal to pay the tax and NIC your alternative might be to work out how much you have earned, ring a local tax office and ask for an appointment to see an Inspector and make a clean breast of it.  HMRC cannot take what you have not got and you may be able to make a settlement of what you have.

 

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By gazza5
03rd Feb 2012 12:49

Deal

Should be easy to get a deal with HMRC - I don't condon tax evasion but its likely you will only need to file 6 years of returns at most. Being upfornt about it all is the best option - I would deal with the years you earnt 20k first, the lesser older tax returns where you only had £8k profit I would do them last.

Have you had any assessments from HMRC for tax due? Have you paid anything? Do they know anything about you?

My advice would be set up a company straight away - deal with your back taxes but going forward on £20k a year you are going to be basic rate and paid all tax at source (salary / dividend) so therefore in future only smaller pnealties will happen if you don't file a tax return.

But you do need a accountant - and one who is going to act quickly - fees maybe a bit painful but rememebr its a tax deductable expense!

 

 

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03rd Feb 2012 14:26

no tax return

My advise would be leave for a couple of years go and in joy your self.

OR if you chose to disclose you can win but you have to win in your mind first. I had ..... million unpaid bill with 70% fine. Took several years but without accountant i paid them the grand total of nothing. was very please with out come. The final point i would make to you is i went to 3 accountants each gave me different advise.

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By masud10
03rd Feb 2012 14:47

10 years no tax return

Definitely GO TO AN ACCOUNTANT and things would be sorted

HMRC is not that bad with penalities and interest as you would be making a voluntry declaration as it happened with me for a client who had not declared his income for 7 years. It was definitely not bad at all in the end. You got to do it one day and as you have funds to settle eventual liabilities, i think this is the best time for you. Reiterating you definitely need an accountant

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By Ray53
04th Feb 2012 03:35

I had exactly this situation last year when a client bought his brother to me. The brother had been renting a property comprising five bedsits for since 1996 and never sent a tax return. Records were totally non-existent, no receipts for anything and no bank statements. I wrote to HMRC and asked for time while we obtained bank statements. The client had said all monies went through the bank, but in all honesty who knows. After going through the statements I managed to cobble a set of figures together for each year with estimates for repairs, insurance and all the usual expenses for a case like this. I sent it all on an Excel spreadsheet, including tax calculations, and a covering letter to the inspector fully explaining the situation with the expenses. Without interest and penalties he owed £19.5k and the total tax bill came in at about £28k. We never received any queries from HMRC, they just accepted what we sent them. I think they were just pleased to get it off their backs and close it down. My fee to the client was below £2k and we wrapped the whole thing up in about three months. My advice to you is go and get a small accountant who will not charge the earth as HMRC will see this as your taking a proper serious appraoch to this, if you don't your are open to pie in the sky figures from them and a whole lot of hassle.

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By birdman
07th Feb 2012 23:32

Voluntary declarations

Don't know if it's just me, but I've had several cases in the last few years where I've had to submit 6 years' worth of Tax Returns, and I've yet to have a question from HMRC, let alone an enquiry. I suspect they're happy to get these people on the straight and narrow. Having said that, the majority have had CIS deductions, and some have even obtained refunds. We also don't know if OP ever registered as self-employed (and if any determinations have been raised).

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08th Feb 2012 12:38

thats right !

Pick the cheapest one ! LOL Start a bidding war...what will they give away free.

If you notice the real advice did not blatantly tout for your business.

a word to the wise....anyone can call themselves an accountant ........the only word protected by law is Chartered (those who could pass the exams)

Most accountants offer a free consultation.

I would pick someone local to you that is recommended to you by a reputable businessman and carries a Chartered badge. (it comes with safeguards for your own protection)

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13th Jun 2013 13:24

Sorted

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14th Jul 2012 15:16

Yes, I hope ashbee has come out of the cold

I have helped quite a number of people to come forward to HMRC, including some who have been "missing" for even longer than this. Voluntary disclosure even in such extreme circumstances would mean this would be dealt with through a civil settlement with HMRC. One cannot say the same with certainty where HMRC catch up with the delinquent non-taxpayer first.

I would not be judgemental. I don't like tax evaders but as soon as one of the "missing" has made up her / his mind to come forward and asked me to help they are clients like any other that I will do my best for.

 

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17th Jul 2015 17:50

I hope you got it sorted

I also need advise, I have a "Self Employed" status with a company I earn commission only with, my taxes are up to date, however, a few years ago, I set up my own retail company and have lost £1,000's, about £20K per year since 2011, I have remortgaged my house, put in my inheritance, sold family jewellery too to survive, foolishly, I did not declare this business (in all honesty I was ashamed) I am left with about £80K personal debt because of this enterprise. My "commission only" job, earning between £20-£30K per year is fully accounted for. I am now under investigation with HMRC, I have given them everything I have, proving beyond all reasonable doubt how much money I have been losing (borrowing money from credit cards and friends etc). My accountants bill is already running into £5K, just getting me deeper into debt. It appears HMRC think I have been hoarding money away, NOT…… and won't let go, this is making me very ill, I even contemplated suicide, all I have is my home, which is where my grown up children reside, massive  over draught, huge credit card debts and my "commission only" job just gets sunk into the debt to try and lower. 

Can I be put in jail for not declaring a genuine loss making business like they say? or are they just scare tactics? I am not the brightest of people just a very distraught single mum who tried to make it on her own.

 

 

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