personal bankrupcy & unfiled Tax Returns

personal bankrupcy & unfiled Tax Returns

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New client to us. Not much known.

He is in employment but is about to be made redundant.

He is finding that his part time hobby - as a film extra - is taking off. He is being asked to take more work but, even so, none of this pays very well.

He has never declared this film earnings in the past but realises he must do so.

To cap all this he is about to be made bankrupt.

My initial question is - what is HMRC's approach to this?

When he is made bankrupt will HMRC still insist that he files all his outstanding Tax Returns? I suppose they will as they need the forms to work out the Crown debt.

Not familiar with this situation so any advice, recommendations, pointers and tips would be much appreciated.

Thank you all.

Replies (3)

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By Midlands Accountancy
18th Sep 2012 18:53

Play safe -

Get all outstanding Returns filed. It really doesnt matter how much tax is due he isnt going to pay it if he becomes bankrupt. File them before he becomes bankrupt.

 

The point is that he will then go bankrupt owing HMRC £xxx and that debt will be wiped off by the bankruptcy so he starts with a clean slate.

I saw a case where HMRC insisted on an outstanding return from before the date of bankruptcy, then raised an assessment of tax liability arising, and argued that as the tax bill was raised after the bankruptcy and was not listed in the debts when the taxpayer went bankrupt, it was current and payable.

They argued that although the income giving rise to the tax pre-dated the bankruptcy, the assessment was raised after the bankruptcy and therefore that was the date on which the debt arose.

No idea what finally happened, but I do know that a lot of letters went back and forth. Do you realy want that kind of grief ?

 

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By bernard michael
19th Sep 2012 09:15

Make sure you get your fees up front

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By taxinfo
19th Sep 2012 11:05

Thanks guys.

Will bear all this in mind and, yes, the "fees up front" issue has been mentioned already.

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