I haven't paid tax on work outsde my job and I'm bricking it!

imuselesswithcash

Howdy,

I have a little problem. A year ago a friend asked me to produce a website for him - this I did in my free time. I charged him for this and in 2008 I think I received over £6000 off him as I worked so much! This year he has asked me to add this and that and keep an eye on things and so far in 2009 I've received around £1500.

I haven't paid tax on any of this money (as I'm an idiot) as I didn't expect to earn so much or do so much work- we came to an hourly rate and over time that's what it came to. I have a full time job and I didn't want to work in my freetime - it was more of a hobby / learning exercise. Anyway I now am worried that the tax man is going to want to know where this money has come from and why I didn't pay tax as my friend asked me to invoice him everytime I'd needed payment for all the work I'd done. The invoice I sent naturally have my address and name on them - as I wasn't trying to hide anything.

I've spoken to some friends about this and they have said the following:

a) Don't worry about it as if I haven't heard anything yet I won't in the future and individuals aren't reported unless they're a big case.
b) Set up as a sole trader and start paying tax on any new income.
c) Set up as a sole trader and pay tax for all earnings in 2008/2009 and expect a fine or worse (not good as I won't have the money to cover this).
d) Get ready for prison!

What should I do?

Thanks

imuselesswithcash

Sorry I forgot to mention that the website I created was for a friend's company.

fengirl_2

In answer to your friends:
a. HMRC treats all taxpayers equally - they are just as likely to go after big cases as small 'quick wins'. How do you think trainee Inspectors learn their job?
b. Good idea
c. Better idea. You have until 31 October to declare this money without incurring a penalty or interest. The tax is not payable until 31 Jan 2010.
d Only realy really bad people go to prison.

You can ask for a self assessment now and declare the income as casual fees without registering as self employed.

pjcox2005

Fengirl's advice is spot on.

In terms of tax years, they run from 6 April to 5 April each year. As such, it would only be earnings before 6 April 08 that you should have already declared and paid tax on. Just something to consider.

In terms of any earnings betwen 6 April 08 and 5 April 09, it would be sensible to calculate how much you owe, either ask for help here or look at HMRC's website and start saving the tax so that you'll have it by 31 Jan 2010.

MrCarrot

Take my advice with a pinch of salt - nobody is in your shoes apart from yourself.

However if it were me, I would have done the same thing as you and not declared the money. The prisons are overcrowded, they wouldn't send you to jail for this.

The worst that can happen is they find out about it, and make you pay the tax later on together with a penalty. Since you're in full time employment, they can investigate you to their hearts content and find you've done nothing else wrong (unlike a normal self-employed person whereby potentially they could open a massive can of worms).

Also, if you declare this you'll need a self assesment tax return, of which they'll then send you one every year and you'll have to complete even if you have no additional income.

Maybe immoral, but I would just pocket the money. If someone lends a hand to a friend moving house and that friend bungs them some money for helping, do you really believe it would be declared on a self assesment form? If this was your only source of income then maybe you should pay, but I am guessing you pay more than enough tax from full time employment.

There is a chance HMRC will find out about your money but it's very, very slim indeed. Sadly as a nation we all live in little boxes of fear whereby we believe the government have psychic abilities, TV detector vans and will hang, draw and quarter us if we dare try and save a bit of money. As I mention my advice might be immoral, but feel free to write out a cheque to HMRC and just hand over your hard earned money - nobody is stopping you.

imuselesswithcash

"There is a chance HMRC will find out about your money but it's very, very slim indeed." - what about the invoices I sent to my friend - aren't I traceable from those?

iamana1ias

Hint: Fengirl works/did work for HMRC

MrCarrot

imuselesswithcash wrote: »

"There is a chance HMRC will find out about your money but it's very, very slim indeed." - what about the invoices I sent to my friend - aren't I traceable from those?

Yes absolutely. This is perhaps the single most way you're likely to be found out. However, assuming your friend runs a successful business, he's likely to have hundreds or even THOUSANDS of invoices from many different sources. And even then, none of those would ever come to light unless he's investigated by HMRC.

So yes it's entirely possible they could investigate him, happen to see your invoice, check out your details, see you're not registered and then contact you. But honestly, what do you think are the chances of this happening? And if it did, you just plead ignorance, pay the tax and whatever penalty they give you.

fengirl_2

MrCarrot, it's this site's policy to not encourage people to evade tax.

Dave101t

the hmrc might in 20 years, find this and ask for the payment, or not, just leave it for them to find. if you 'forget' about it your not committing a crime, if you deceive them, you are!
you could always try to get it as unearned income, i.e. capital gains by saying the website generated the money for you, rather than being paid for your work.

Pumpkinface_2

Dave101t wrote: »

the hmrc might in 20 years, find this and ask for the payment, or not, just leave it for them to find. if you 'forget' about it your not committing a crime, if you deceive them, you are!
you could always try to get it as unearned income, i.e. capital gains by saying the website generated the money for you, rather than being paid for your work.

But OP hasn't forgotten about it, they know about it as they have mentioned it here. Therefore they are most definitely committing a crime if they choose not to declare it now.

Your capital gian on website suggestion does not make any sense. :huh: