Hi all,
I have been working 'unofficially' as a sole trader since November 2001 but only registered as self-employed with the Inland Revenue in April 2004, so I have not declared any income between this period (2.5 years).
I would like to come clean with the IR and inform them of the real date that I became self-employed and then payback all the backtaxes owed. However before I do I would like to obtain advice as to:
a. what the possible penalties would be (financial penalty/prison?)
b. what would be the best way of approaching the IR in order to minimise the penalty.
c. roughly how much back-tax I would owe. My total income during that period of non-declaration was around £130,000 with around £5000 of expenses in total.
Finally, would it be best to declare this additional income on this year's tax return (ie. my 2004-05 return)?
Thanks in advance for any advice you can give.
Jonathan Mardukas
Replies (5)
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See an accountant asap!
The best advice I can give you is make an appointment to see a good accountant. Explain the full circumstances and disclose all details to him/her and they will advise the Revenue for you and explain properly all penalties etc payable.
the sooner the better
I think NCIS is a problem, but, the interest charge on the taxes due is racking up every day. You need to speak to a good adviser. HM Revenue & Customs will take interest in you, the longer you delay.
NCIS
Yes, NCIS will need to be informed, but you can get letter off to HMRC at same as NCIS report and hence get fullest remission for coming clean voluntarily.
HMRC issued helpful commentary on this point, and gave "central" address in Cardiff that they suggested these "marker" letters should be addressed to. See Tax Bulletin 70, April 2004.
Of course, this makes a mockery of need to waste a postage stamp and ink for the NCIS report and means we hve even more useless bits of paper flying about - quite apart from gumming up NCIS from doing anything that might be useful.
.clarification...
.. Jonathan
NCIS need only be informed by your accountant (if you get one) not by you.
To declare the missing income in 2004-05 would unfortunately not be "coming clean", as it would be false. Ironically it may lead to higher income tax, but probably lower national insurance, and would be an attempt to evade penalties and interest.
I'm afraid you are well advised to seek professional help on this one rather than do-it-yourself.
There is no prospect of prison, even remotely, if you come clean and decalre all, especially if you get to Inland Revenue before they get to you.
Penalties are up to 100% of taxes not declared/paid, but you mitigate this significantly by voluntary disclosure (ie coming clean) and full cooperation.