Client never did a 2010/11 tax return

A client came to me after not paying any tax for 18+ months, a limited company contractor. He joined me after 31 Jan 12. His Ltd has a year end of June.

He took loads of money out since setting the company up (ignoring the CT bill and everything else). My plan was to date dividends to May 2011 so that they fell into the 11/12 tax year (money withdrawn being a DL up until that point). The problem then though is that there are effectively two years of dividends going through in 11/12 so a higher proportion of them fall into the 32.5%/25% threshold boosting his income tax bill.

What would happen if I was to phone up HMRC and say sorry client didn't realise he had to register as self employed, he was never asked to submit a 10/11 tax return but should have? Interest + late filing penalty + potentially not registering as self employed?