Rental Income plusCGT- Blackmail-ish

Crunched

Stupid boy, only yourself to blame..all the self loathing possible sits rightly upon my shoulders but read on and let me know how to go about confessing as this is what I have decided to do for reasons I will explain.
Made redundant, boss wouldn’t pay out correct notice or redundancy so going to Employ Tribunal ( going April 2009}. Former boss has written a letter to me yeaterday saying…
Further to your request several weeks ago I have given details of sale and purchase plus rentasl income on X for the period 2001-2007. I never asked him to.
The facts . Bought flat to rent in 2001 and sold Jan 2008 never declared any rent income or CGT ( yes I know, no excuses guilty as charged). Made approx £200 per mth on interest only mortgage. This is the only buy to let property I owned which I bought to bail me out 1987/88 low start endowment fiasco (lucky me).I am and always have been a 20% tax payer.
He is either telling the truth or it’s a form of blackmail. Either way I have no option but to meet it head on and take my punishment because it’s not something that I can have hanging over me or my family. Like all blackmailers they never stop when they have something on you. I have enough to reciprocate but unsure how to go about it......He is an estate agent and I rented property through him ( dog bites dog !)
Apart from this major blight I have no history of evasion. (great mitigation eh )
Any advice on how to broach my confession to her majesty is appreciated.

ceeforcat

provide some figures:

1) Cost price

2) date and cost of amy major modifications

3)Sale price

4) Costs of purchase and sale

Also has discovery been competed yet in IT case?

Crunched

1.95k
2.253k
3.2.5k paid to housing association for communal major works plus 5 k when ip urchased it to make it habitable and furnish
4.Aprrox 5k
5
IT case ?

fengirl_2

Your gain is about £145k, so substantial liability.
I think ceeforcat is asking whether HMRC have contacted you about this yet.
I agree with you, time to come clean, but I would seek the services of a good accountant who can do the sums and negotiate with HMRC on your behalf.

ceeforcat

No, fengirl, I agree with everything you have said – always better to inform the HMRC before they get to inform you.

When I referred to I.T. – I meant Industrial Tribunal or Employment tribunal. Presumably you have a solicitor? Both sides will be required to provide full discovery of all documents upon which they intend to rely. Produce the most damning against your employer (you said you could reciprocate?) until the very end and, hopefully, your solicitor will feel inclined to seek an offer from your opponent in order that you ‘go away’. There is always a lot of game playing in these. Generally, your solicitor will be using the ‘blunderbuss approach’ where he will include as many accusations as he can in your affidavit, some so petty you will not believe. If just one is found to be true, your former employer loses the whole case. If it were me, I would be writing back to say:

‘Thank you for supplying the information in your letter. This has been passed on to my accountant who looks after my tax affairs’.

It would be nice for him to know that he does not have this leverage over you.

With regard to the tax position, the CGT was due on 31st January 2009 and so the penalty will be low (if any) especially in view of the fact that you are ‘coming clean’. The income tax is a slightly different scenario but did you really make £200 per month profit? What about, rates, repairs, insurance, management costs and Wear and Tear?

Good luck.
[EMAIL="Paul.Ferris@TheMountPractice.gp.n-i.nhs.uk"][/EMAIL]

Crunched

Thanks for that. In the middle of responding at the minute.

The ET is the least of my worries as the amount is relatively small (3k).He is unaware that I am considering opening another shop nearby him with 2 other fellow redundees ( is that a word)they may not happen now. and I think that he would have got round to this at some point even though at the minute the triggers is the ET.

Acas have appointed me a rep that I am yet to speak to.Apart from this I am have nothing else in the cupboard. Do you think that by bringing up the odd midameanour of his in this environment is helpful. I think I have a nailed on case as he is trying to evade paying my statutory 9 weeks notice ( been there 9 years) plus holding back on the basic redundancy. I suppose I could be playing tricks with him if i did but as I am resided to come clean maybe that would be a dish best served cold and annonymously.

As to money owed can you give me a ball park of what the worst case scenario might be given my previous figures. What chance of claiming all the offset stuff when I havent done the right thing ? I can show management fees etc... Thanks again for your time, it is appreciated

dunstonh

If you come clean, HMRC are likely to penalise you less. You will be penalised though. If they approach you (and they will at some point) they penalty will be higher.

Really rough ballpark. (with rounding)

£200pm x 7 years £16,800 x 22% tax (it was 22% for most of that period) = £3696. (this assumes it didnt take you into higher rate - probably closer to £3500 when you take misc expenditure into account).

£153k gain - £9000 personal CGT allowance (ignoring some taper relief you may be able to include) means CGT tax bill of around £57,600 (assuming 40% on lot. Some will be chargeable at basic rate but it depends on what your income was in 2007/8)

HMRC will probably penalise you by about £1000-£3,000

So your tax liability is likely to be around £40,000-£65,000

ceeforcat

You must claim 'all the offset' stuff - late ot not HMRC can only tax you on the profit!

Crunched

Thanks ceeforcat and dunstonh

07 08 Pay was 14k.My wife was joint owner does this help ? Need an accountant, where best to look ?

dunstonh

Joint makes a difference as you both have personal allowance. Your pay is lower than I estimated and you need to include your wife.. That should bring it down significantly.

fengirl_2

There will be interest to pay as well. You should be prepared to make a payment on account up front both in order to show goodwill and to stop the click ticking on the interest.
If you dont know anyone who can recommend a good local accountant, all you can do is look in Yellow Pages. Choose a firm which is somewhere between Deloittes and a one man band and which has a professional qualification. Most will give you half an hour of their time free, so there is nothing to stop you going to 2 or 3 and picking the one you think you can work with.