tax credits voluntary disclosure

tax credits voluntary disclosure

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i know of someone who has been self employed for sereral years, during the first 2 years of self employment that person didnt declare thir full income which totalled £6000 not declared the first year and £5000 the second year. that person wants to come clean to the inland revenue.
also a year ago the same person also claimed tax credits as a single person for 11 mths when it was only 5mths. the total amount of tax credits overpaid is around £3600.
can you voluntary declare this to the inland revenue and what would be the likely outcome. the person is in a postion to pay all the money back plus any fines etc.
thanks
sam quinn

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David Winch
By David Winch
03rd Jan 2008 14:20

It can be done - with care!

Sam

It is indeed possible to 'come clean' on over-claimed tax credits and under-declared income by making a voluntary disclosure to HMR&C.

It might be wise for your friend to contact an accountant for help doing this.

The important thing is to make a full disclosure of any misdeclarations, so there is no chance of being tripped up later by HMR&C finding out something extra.

Bear in mind that if your friend dealt with HMR&C over the telephone with regard to tax credits they will have recordings of the telephone conversations. They will check what he says now against what he said then, so there is no point in trying to 'massage' the truth. He should admit that he did not tell them the truth previously.

Technically, there is a risk of criminal prosecution and prison for people who lie to the HMR&C. But if your friend makes a voluntary disclosure of everything he has done wrong then HMR&C will not prosecute him (unless he happens to be an accountant, solicitor, barrister, judge or other person whose lies to HMR&C really cannot be tolerated - or he is an employee of HMR&C himself).

What they will do is check up on his financial affairs in detail (probably asking to see his bank statements, etc) and ask for payment of the full tax due, repayment of the overpaid tax credits, interest and a penalty (a fine, in other words) on top. An accountant can help negotiate what the penalty should be.

He should get professional help from an accountant before he contacts HMR&C.

David

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