Self Emplyed TAX Question

licious · 20 May 2013 at 11:13AM

Hi guys,

A friend of mine has been running a self employed business for a while now, not sure when she started but I would say about a year ago (maybe a bit less). She has never registered as self employed nor declared any of her money to HMRC. She works full time and pays tax that way.

She has now received a Compliance Check letter from HMRC and is extremely worried!! She knows she has done wrong and wants to own up and obviously pay back what she owes. She has spoken to HMRC this morning and they have advised her it's just a standard letter that's being sent out to numerous people and if she has anything to declare she should put it all down in writing and send it to them.

She has also spoken to an accountant who has advised her it's much worse than that and to make an appointment with them to go through it all.

She knows she should have registered as self employed within 3 months of starting up, but for some reason never got round to doing it and now she thinks they're on to her - which obviously they are!!

Can someone please give me some advice on this as I really want to give her as much support as I can.

Thanks.

anselld · 20 May 2013 at 6:45PM

If it has been going less than a year there would be no tax due yet. She has until Jan to submit a tax return covering self employed income for the year to Apr 2013.
So the only problem is failing to declare self-employed and pay class 2 NIC. There may be a penalty but it would be better to get on and declare it before they find out.

System · 20 May 2013 at 7:16PM

The accountant is right it's highly likely HMRC know more than they are divulging and they are giving her the chance to come clean.
If what she declares does not match up with the information they have already found then she faces penalties.
A good accountant can help her deal with this if she's not confident herself.

Skint_yet_Again · 20 May 2013 at 8:34PM

These links may provide more information on the campaigns run by HMRC.

https://www.gov.uk/government/policies/reducing-tax-evasion-and-avoidance/supporting-pages/hmrc-s-new-publicity-campaign-against-tax-evasion

https://www.gov.uk/government/publications/tackling-the-hidden-economy

She should register now if she hasn't done already. http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm

It would help if you could tell us the actual date of starting so we can determine if there is any late tax return / late payment penalty likely to be due.

licious · 21 May 2013 at 10:58AM

Thank you so much for the replies.

I have spoken again to her late last night and she is in a really bad state - apparently, she's been doing this for about 5 years! :eek: She knows she's done wrong and wants to get it all sorted and has an appointment with an accountant tomorrow to go through everything, receipts etc.

Like I said before, she knows she's in the wrong and she is willing to pay back everything she owes (plus any prenalties charged) but at the moment she can't see an end to it all.

Thanks for your help.

nonnatus · 21 May 2013 at 11:09AM

FIVE YEARS!!! That's not a matter of "forgetting to get round to registering" - It's proper tax evasion! How did she think she was going to continue getting away with it? I can't believe it's taken HMRC 5 years to find her... I get hassled from the minute a bill falls due until it's been paid!

PlutoinCapricorn · 21 May 2013 at 11:13AM

Doing extra work without registering as a sole trader is not unusual, but most of the cases on MSE concern people who decided to approach HMRC themselves, in which case the penalties may be less.

We have heard about HMRC's campaigns and detective work, but I can't remember anyone else who reported being found in this way.

You can help by advising full co-operation and disclosure. I hope that there are records of all the income and expenses involved.

This story may influence other people and make them decide to register their business to avoid all the stress and extra penalties, interest etc. It would be very interesting to hear the outcome.

[Deleted User] · 21 May 2013 at 11:58AM

How much profit is there? If she's been selling things from catalogues and been taking home a few thousand pounds per year it's going to sting but it isn't the end of the world. If she's been making tens of thousands profit per year she's going to be in trouble but it seems unlikely that is the case.

IronWolf · 21 May 2013 at 3:57PM

Rather than reply to HMRCs letter, she could just register as self employed and 'come clean'. They might believe that she did this of her own accord as the various departments wont know what each other are doing, so will treat her more favourably.

But 5 years is tax evasion, all she can do is assist HMRC, put aside some money to pay the fines and hope they stop at the fines. Maybe she should consult a solicitor as well just to see whether any legal consequences are likely and what she needs to do about it?

Self Emplyed TAX Question

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