HMRC compliance check

HMRC compliance check

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I have a client who has received a letter from HMRC to say that HMRC records show the individual has been self employed but has never submitted tax returns.

The client has earned commission from a self-employed post working evenings and weekends as well as working in a part-time job. This has been the case since 1989 and the client has already contacted HMRC to tell them this!  Commission earned c£5000 per annum. Allowable expenses will include motor/car, some stationery, accountancy fees (of course).

My question is this - will HMRC now demand the income and expenses since 1989 or will they restrict their compliance check to, say, last 6 years?

My client cannot get info on commission earned from the company they earned from beyond 6 years anyway. They have obtained a printout of amounts paid to them for past 6 years. Expenses will be a reasonable estimate in the absence of receipts.

Any idea on level of penalties too? I am hoping for 20% to 30% maximum!

All help/advice appreciated guys.

Replies (2)

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By John - Horler Tax
26th Jul 2012 16:18

Ouch

 

If it is a 'Failure to Notify' or a deliberate offence then HMRC can go back 20 years.  They might limit that but there is no requirement to do so.

Provided you and the client co-operate you should get to the ball park penalties you mention, you may be able to argue that it was an 'unprompted' disclosure but that will depend upon the circumstances, but will reduce the penalties.

In the absence of other information £5,000 a year will be a good starting point for HMRC.

Is the client truely self-employed?

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By Tax Networks
28th Jul 2012 19:22

more facts are required

For example, why did he not disclose the commission, was it because he had not breached the tax threshold? Did he keep any records etc etc.

I would recommend a prompted outline disclosure and engage HMRC followed up by a full disclosure with a compelling argument about client behaviour and so forth.

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