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Not paid tax for 10 years. Help!
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# 1
Breakingpoint
Old 25-02-2011, 2:34 AM
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Default Not paid tax for 10 years. Help!

Right. I know I am the biggest idiot ever and I have no idea how this has happend but I have got into the worst predicament.

I am a computer programmer. Up to 2000 I worked PAYE then made redundant - Since then I have been Freelance with only a few clients all paying me by cheque - Somehow I thought tax was paid at source. I have found out this was wrong about a year ago - I've never been taught any financial lessons at all. I know I am nieve and stupid.

My pay has been sporadic from 10K up to 35K I would estimate. I've had 1 bank account in that time and it all went though there.

I am of course terrified of a huge bill, I won't be able to pay in one go, and possible prosecution ( although I understand that HMRC are keen to avoid that as it's not productive nor helpful )

Now I want to right these wrongs. Are there specialist advisors on these matters? I am in the south London area?

Thanks

Last edited by Breakingpoint; 25-02-2011 at 2:39 AM.
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# 2
PlutoinCapricorn
Old 25-02-2011, 8:39 AM
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Default Tax not paid for 10 years

There have been people on MSE before in your position. They were all encouraged to own up and pay up.

If you report yourself to HMRC and cooperate with them, the penalties may be less than if they discovered you themselves. There will be interest to pay too. You might be able to get them to agree to a payment plan.

Did you ever register as self employed? Have you been paying any National Insurance?

Did you invoice your clients, and can the amounts be matched with payments on the statements?

I was a computer programmer, and find it difficult to believe that anyone with that kind of mind could get into this situation.
Who having known the diamond will concern himself with glass?

Rudyard Kipling



Last edited by PlutoinCapricorn; 25-02-2011 at 5:48 PM. Reason: typo
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# 3
heretolearn
Old 25-02-2011, 11:29 AM
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Will PM you.
Cash not ash from January 2nd 2011: £2565.

OU student: A103 , A215 , A316 all done. Currently A230 all leading to an English Literature degree.

Any advice given is as an individual, not as a representative of my firm.
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# 4
lendusaquid1
Old 25-02-2011, 11:56 AM
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Sounds great to me. Its what we all should be doing and we would all be alot richer if we did. Dont tell them anything untill you have sorted yourself out.
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# 5
angelpie1000
Old 25-02-2011, 4:45 PM
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You need to own up. If you are honest with them and co-operate, you'll end up in a better situation.

There will be tax, interest and penalties to pay, but best to be honest upfront.

You mention you realised about a year ago that this wasn't being taxed, why didn't you do anything about it then?

If you are in doubt, you could ask an Accountant to sort it out for you, obviously for a fee.
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# 6
Breakingpoint
Old 25-02-2011, 6:22 PM
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Quote:
Originally Posted by PlutoinCapricorn View Post
If you report yourself to HMRC and cooperate with them, the penalties may be less than if they discovered you themselves. There will be interest to pay too. You might be able to get them to agree to a payment plan.

Did you ever register as self employed? Have you been paying any National Insurance?

Did you invoice your clients, and can the amounts be matched with payments on the statements?

I was a computer programmer, and find it difficult to believe that anyone with that kind of mind could get into this situation.
Yes I understand - I do want to get myself straight.

No not registered.

Yes Payments can be matched against invoices.

I know. But I genuinely believed that tax was paid by the vendor - If I'd known I would have just charged more and paid up! I am an idiot and was also a lot screwed up for a number of years due to insomnia / alchohol.

But I am not here to pour out past woes - Life is great other than this now and I need to get it sorted.
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# 7
Breakingpoint
Old 25-02-2011, 6:28 PM
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Quote:
Originally Posted by angelpie1000 View Post
You need to own up. If you are honest with them and co-operate, you'll end up in a better situation.

There will be tax, interest and penalties to pay, but best to be honest upfront.

You mention you realised about a year ago that this wasn't being taxed, why didn't you do anything about it then?
Thanks - I plan to be. I found out how wrong I was a year ago - but as posted above. I was a bit of mess basically between 2003-09/10.
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# 8
Breakingpoint
Old 25-02-2011, 6:28 PM
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Quote:
Originally Posted by lendusaquid1 View Post
Sounds great to me. Its what we all should be doing and we would all be alot richer if we did. Dont tell them anything untill you have sorted yourself out.
Not sure that helps matters.
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# 9
Mikeyorks
Old 25-02-2011, 6:54 PM
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Quote:
Originally Posted by Breakingpoint View Post
Not sure that helps matters.
Quite right - unfortunately morons are also allowed to post.

This is one of those areas where sourcing an accountant and getting them to prepare the accounts - and pave the initial contact with HMRC ....... may cost you less overall. Worth considering as it also keeps some of the stress at arms length?
If you want to test the depth of the water .........don't use both feet !
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# 10
Breakingpoint
Old 26-02-2011, 12:29 PM
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Quote:
Originally Posted by Mikeyorks View Post
This is one of those areas where sourcing an accountant and getting them to prepare the accounts - and pave the initial contact with HMRC ....... may cost you less overall. Worth considering as it also keeps some of the stress at arms length?
Yes. I can see that an accountant is going to give me some perspective at least.

A few Questions.

1. Can anyone give me a rough estimate on how much an accountant would cost to prepare accounts from my invoices and bank statements? I Know this is a hard question to answer - but would rather be prewarned.

2. Are HMRC likely to speak to my partner? We have a joint Bank account for Bills etc.

Thanks for everyones advice.

Anyone else been in a similar situation?
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# 11
PlutoinCapricorn
Old 26-02-2011, 1:55 PM
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Default Not paid tax for 10 years

I hope that one of the ex HMRC people on MSE will come along and give good advice. I do know that there are offices where you can go in and get advice directly from HMRC.

There was someone on MSE last year who said he would go and own up, and we asked him to report back on how he got on but he never did!

For each tax year, the personal allowance would be different, as would the bands. You would need the income and the legitimate expenses to arrive at the taxable profit. Have you got the figures for the expenses? Normally, for self employment there is a figure (now £60k I think) and if you earn under this you just need 3 totals: total income, total expenses and profit. But in your case, HMRC might want to see evidence for everything. Have you got your old electricity bills etc?
Who having known the diamond will concern himself with glass?

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# 12
PlutoinCapricorn
Old 26-02-2011, 2:20 PM
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Default Not paid tax for 10 years

I found this thread from someone who was out of the system for 20 years!

They are quoted £300 for an accountant - this was 2008. Some accountants give you a free 1/2 hour consultancy I believe.

Some people suggest getting back into the system and hoping for the best, but HMRC often want to know what you have been doing since they last heard from you.

http://boards.thisismoney.co.uk/tim/...0&thread=87984
Who having known the diamond will concern himself with glass?

Rudyard Kipling


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# 13
Breakingpoint
Old 26-02-2011, 3:27 PM
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Quote:
Originally Posted by PlutoinCapricorn View Post
arrive at the taxable profit. Have you got the figures for the expenses? Have you got your old electricity bills etc?
I do have a lot of bills and receipts. Actual expenses I am not sure about as I was working from home. Some client visits - Computers and equipment. I am doing research myself now and trying to work out what I need to gather - I am learning a lot - Fast!

I was renting for a while. I have a long term 10 year fixed Mortgage my bank gave me at a great rate. That was very hazy period of my life and I don't recall very much.
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# 14
PlutoinCapricorn
Old 26-02-2011, 6:21 PM
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Default Not paid tax for 1o years

I was wondering what happened before all this started. If you left a PAYE job, you would have been given a P45. If you didn't give this to a new employer or Jobcentre, HMRC would have written to ask you what was going on - each year until they got a reply! Do you remember that?

One file for each tax year is a good idea, with the corresponding paperwork. It is possible for you to estimate the tax due each year, if you sort the expenses out and learn the rules and do a reconstruction. You do need the tax rates, allowances etc for each year for that.

Another option is Citizens Advice: cuts and redundancies are affecting many services, but they may have an advisor who can help.

It seems that you are preparing to report yourself and take what comes: HMRC call it voluntary disclosure. You may be able to negotiate a settlement.
Who having known the diamond will concern himself with glass?

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# 15
agrinnall
Old 27-02-2011, 12:10 PM
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Quote:
Originally Posted by PlutoinCapricorn View Post
I found this thread from someone who was out of the system for 20 years!

They are quoted £300 for an accountant - this was 2008. Some accountants give you a free 1/2 hour consultancy I believe.

Some people suggest getting back into the system and hoping for the best, but HMRC often want to know what you have been doing since they last heard from you.

http://boards.thisismoney.co.uk/tim/...0&thread=87984

I'm very doubtful if any account would be able to prepare 10 years worth of accounts for £300, when I was an IT contractor (admittedly as a Limited Company) my accountant charged 2 -3 times that every year. However, it's unlikely that the OP has the financial skills to sort it out himself so I think an accountant will be required, maybe ask for a few estimates before deciding on one.
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# 16
angelpie1000
Old 27-02-2011, 11:09 PM
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Asking how much an accountant would charge is a very vague question. Accountants fees vary from £minimal to £thousands for the same piece of work. I know this from experience of taking clients on and seeing how much they were paying to previous accountants.

I'd be happy to discuss further offline, I don't like advertising my rates in open forums, but send me a private message if you would like to chat.

Most accountants offer a free initial consultation. Some limit to 30 mins, some are uncapped. If you are looking for a local accountant, it may be worth taking a few accountants up on these meetings to find one you can work with.

Above all, please don't keep secrets from your accountant. He/She is working with you, if you are not completely honest with them they can't fight your case for you properly.

Good luck
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# 17
nw_man
Old 01-03-2011, 1:35 PM
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May be relevent to the original poster, may not :


HMRC to plug fiscal holes with ‘plumber’ tax amnesty

http://www.international-adviser.com...er-tax-amnesty
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# 18
sunshinetours
Old 01-03-2011, 1:59 PM
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In your case I would definitely see an accountant.
The better you can present all teh information (ideally into separate tax years for example) and do some of the summarising work yourself should save you some money.

Reason I would suggest an accountant rather than trying to DIY this one is that the initial approach to HMRC is crucial as is having te information ready to give them on a timely basis. Your accountant will also know what you can and can't claim here. Their fees are also tax allowable against profits

Don't forget its not just your income from IT work but any other income such as share dividends, rental income, bank interest for example. Also details of pension payments made would be relevant

Be aware that any commercially savvy accountant will want at least some funds up front for this type of work

Also do brace yourself for a large tax bill - 10 years of even relatively small profits will add up substantially io am afraid

An average £10k taxable profit for example over 10 years could be around £3k tax and National insurance per year plus interest and any penalties. A £50k total bill could easily be in the realms taking those figures into account purely as an example

Not saying that to scare you but a reality check certainly is required for most clients who come in with a back tax case as bad as this

Good luck
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# 19
tyllwyd
Old 01-03-2011, 2:49 PM
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Quote:
Originally Posted by property.advert View Post
If you follow the advice of all those who advise you to confess and tell all then your next post will be on the bankruptcy board !

The "wrong" but "right" thing to do is to do get a clear picture of just what information the authorities have right now. They know you were on PAYE and then disappeared. ...
But what would you recommend the OP does in terms of tax going forward? If he/she registers as self-employed today, isn't there a danger that HMRC will realise that there is a big gap in their tax records, and it might trigger an investigation? And if they discover that the OP hasn't paid tax (and I would imagine if there is any kind of investigation it wouldn't be too difficult to work out), I thought that they can go back years.

At least if the OP goes to an accountant, the accountant can advise on the best way forward and try to present the figures to HMRC in the best light.
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# 20
chrismac1
Old 01-03-2011, 3:14 PM
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I've just submitted tax returns for a new client who came to me in a similar mess, his started from the 06-07 return. My fee was £350 per year for this. His affairs were possibly a bit trickier as he had no records whatsoever for 3 years, so I was going back to his customers to get his charges to him - luckily he only had 5 during this time. If necessary I was going to Data Protection Act them but it was not necessary.

In your position I would take your records for the past 6 years along to various local accountants and compare their suggested approaches, how you get along and fee quotes during their free initial consultations. Some will no doubt insist on going back to 2000, some will perhaps be more commercial than this and suggest going back 6 years, and so on. Some will be pedantic about having every single receipt and invoice, those you can ignore - inevitably there will be some element of incomplete records here, so you want someone who can deal sensibly and cheaply with this and piece together the missing bits of the jigsaw from those bits which you still have.

I would definitely not advise having an "online" accountant for this, even if the fees one offers are much cheaper. This is not a "box standard" job and you need someone you can meet with and come to a common understanding with. Not me as I am in the Lake District!

And yes there is a risk HMRC will trigger an enquiry but it's a risk you've got to run. Also they are in such a mess that just doing the easy peasy stuff is hard for them right now, so unless the database flags up the gap you are safe. To do this, it will have to marry up your PAYE and self-assessment records. It can only do that using an NI number - here is a hint, a self-assessment submission does not require an NI number but you can include it as on option.
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