Massive tax problem ... please help

wassup

I've got a massive tax problem going on and wondered if any of you can tell me what to do.

Basically after a 4 year investigation the tax man reckons I made a lot more in the year of enquiry than I declared.

Then he has applied the same amount to every year I've been self employed which is 7 years.

He reckons I owe him £45k in tax, but then he adds £12k in interest, and also he's gonna add at least another £12k in penalties.

So I'm looking at a bill of £70k.

Now only about 2 months ago my agent was telling me that the bill should be around £15k and now its jumped up to £70k.

I'm at wits end... dont know what to do.

Only way I can pay this is to sell my house.

I did not make the money in the first place so I dont have it to pay. Since 2002, as well as being self employed, I have been a full time student, studying to be a nurse. I had a market stall at weekends. Yes I made some money but according to this guys guesstimates I must have been taking in around £2000 per weekend, which is just not physically possible given what I was doing was repairing computers.

My agent says its a good deal and I should accept it.... don't know why he's saying that.... but he is. So he has got me frightened of challenging the tax man for fear it might go higher still.

Looks like I will just have to pay it. It doesn't seem fair.

Does anyone here have any experience of this.

Solar1

Why does the taxman think you have earned more than you have declared?

There must have been some discussion between the taxman and you or your agent. What evidence does the taxmanand also your agent have to believe the amount requested represents a good deal, normally they do not do this on a whim.

If there is evidence, why is the taxman only looking at 4 years. I believe they can go back a lot further than this. You need to talk to both your agent and the taxmen to see if there is room for negotiation. Also how are the penalties calculated.

Ask the questions your agent should be familiar with this type of thing.

ts_aly2000

The taxman unfortunately can be very unfair and heavy handed. One of your only real options is bankcruptcy, and be warned that the IR will declare you BC.

My partner is BC as a result of the IR and their hugely inflating what is owed. A bill of some 4k was inflated to about 15k.

Also... another friend, and VERY similar story to yours. She has her own business and ALWAYS did EVERYTHING by the book. IR decided she'd been underpaying and applied this going back 7 years. Result: She now owes them some 20k. They said they were fair and would help her, she went to one of their tribunal things and was totally ripped to pieces.

So in both those cases, the IR do not recognise honesty or good intentions by any means. In all essence, they are !!!!!!!s!

The other shifty thing the IR do is to anticipate your future year's earnings, in your case say 06/07, to demand payment now! And then to demand interest on that payment for something that hasn't even happened yet.

Dealing with the IR is very difficult as practically the humble man never wins. They have more powers than the Police for example. You can mame someone in your car and get a slap on the wrists, but tax evasion, you will surely be made to pay.

About sums up the morals of modern society.

And last comment; no, it isn't fair. I truly do feel for you. This is about time to start shifting assets about and prepare for the worst. Seriously!

*hugs* Aly xx

ps. back here again updating this as I do want to help you out. All you can do is to gather up all of your paperwork and present a case. The IR can't pluck figures out of thin air. As for this agent guy, he sounds a bit of a twerp. You ideally need to put your accounts together yourself so you know EXACTLY where you are.

But to reiterate, this is deep pooh pooh time so I won't dress it up in It'll-be-okays. I would personally start shifting assets about to limit your potential exposure.

clipboard2

Hi,
I have personal ongoing experience of your type of situation, so I can empathise. Do not despair!!

Can I ask, who do you mean by your "agent". If you mean "accountant", then are they actually profesionally qualified/chartered/ members of the Institute?
Did you know, anyone can call themselves an accountant in this country, no qualifications required, even run a company as e.g. Imaripoff Accountants &
Co?
Basically, if you have used an agent or accountant to prepare your books for the taxman , you should not be in this kind of trouble with HMRC. I did, and I am!! My (ex) accountants (unqualified as I recently discovered) made blatant errors with my books since 2000 and frankly HMRC was only doing their job, and basically had a field day .... interest, penalties use of discovery rules to backdate tax etc.

I felt I had no option but to pay the 5 figure sum demanded by HMRC. Certainly the letters I received from them can only be described as legalised bullying and intimidation. I had to keep reminding myself that I had done nothing wrong (except employ an incompetent accountant)

However, since I went to a top London accountant to take over my case, HMRC's demands have all but collapsed. My books are being recalculated, my accounts "repaired".

The tax inspector himself told me to "sue your accountant"; that I am about to do, once my Enquiry has been closed. My solicitor tells me that is is almost 100% certain that I will win my case, and I will get everything back that I have paid in legal and accountancy fees, back tax demands, and more besides for breach of contract, professional negligence etc etc.

My solicitor advises me that "they (HMRC) do like to try it on" - their job is to extract as much money from you and I that they can get away with.
If they spot a weakness, they will exploit it!!

Get some competent qualified professionals behind you who are experienced in dealing with HMRC. You can't deal with this alone.
I wish you courage and good luck.

wassup

My agent has warned me about the IR attitude. This is why he reckons I should accept this settlement, even though I know its not right, but at least it brings the case to a closure, and put the whole thing down to experience.
I'm worried about this future payments tho, he hasn't mentioned about those.

wassup

clipboard... sorry didnt notice ur post b4 i did mine.

I had to hold my hands up to a major error on my part and I was prepared to pay for that. But i didnt expect them to multiply the tax due by 7 years. Its quite a shock.

I did my own accounts so nobody to blame but myself... doubt if i could afford a top lawyer... wud come to more then the tax due probably.

Poppy9

Is your agent an Accoutants (qualified or unqualified)? Has he been preparing your books and tax returns for you?

If the taxman is saying you've been taking £2k per week,then that means you are turning over £104k per year and puts you in VAT registration bracket. Are you registered for VAT as this could be the next problem. If you are registered for VAT and have had regular VAT inspections then this might help your IR problem as the VAT people are the meanest on earth with their penalty targets etc. If you were undeclaring or doing something wrong they would have found it.

First you must not accept this bill from IR, write and say you are disputing it and are engaging professional advice from a Tax expert. You have to find a tax expert to help you fight this. You will need to be totally frank and honest with your tax pro. as he can't help you if he doesn't have all the facts. If your books/paperwork do support higher turnover figures it's not the end of the world as you may have been underdeclaring your expenses. Also you maybe able to add your partner to your accounts and claim extra tax relief.

You must now dig out every bit of paper relevant to your business and home for yourself and wife for the last 7 years. Include credit card statements, bank statements, saving accounts, loans etc anything personal that will hopefully show that your lifestyle was comprable to your declared income. If you don't have a passport because you couldn't afford holidays, it's relevant as is moving house, the value of your house, car etc. All these are usually indicators of income.

Good luck.

Poppy9

wassup wrote:

clipboard... sorry didnt notice ur post b4 i did mine.

I had to hold my hands up to a major error on my part and I was prepared to pay for that. But i didnt expect them to multiply the tax due by 7 years. Its quite a shock.

I did my own accounts so nobody to blame but myself... doubt if i could afford a top lawyer... wud come to more then the tax due probably.

What is your major error? A few questions:

1. Have you been working from home or have you rented premises over the last 7 years?
2. Have you bought any equipment for use by the business, if so how did you treat it in your accounts?
3. Does your wife work? If not employ her, back dated of course!!

wassup

ts_aly2000 wrote:

I would personally start shifting assets about to limit your potential exposure.

I did ask a solicitor about this away back when it first kicked off and was told it cant be done. If they can show you moved assets to avoid paying they can claw back... up to 7 years or something like that.

The hardest thing for me to deal with is seeing my wife crying with all the stress of it.

wassup

Poppy thx for ur input, but most of ur suggestions have been included in my returns.

I'm not vat registered.... the £2k per week is my calc based on the fact that for the past 3 years I have diaries showing my attendance at university and placement as a nursing student. This takes out most of all the weeks days in the year plus some weekends. Factor in some weekends that were holidays etc and it only leaves a small number of weekends I had available to do any trading. But despite taking on the student role the tax man has not adjusted his figure down from the earlier years when I had all week to work. He has picked the busiest year and applied it to all subsequent years regardless.

Poppy9

wassup wrote:

Poppy thx for ur input, but most of ur suggestions have been included in my returns.

I'm not vat registered.... the £2k per week is my calc based on the fact that for the past 3 years I have diaries showing my attendance at university and placement as a nursing student. This takes out most of all the weeks days in the year plus some weekends. Factor in some weekends that were holidays etc and it only leaves a small number of weekends I had available to do any trading. But despite taking on the student role the tax man has not adjusted his figure down from the earlier years when I had all week to work. He has picked the busiest year and applied it to all subsequent years regardless.

He can pick a busy year as a sample if he wishes but he can't automatically apply it to previous years. He is taking advantage of the fact you have prepared the accounts yourself. This is why you have to engage a tax pro. Yes it will cost you money but not as much as the tax bill. He will pay for himself and the first session with him/her will probably be free as he will be able to judge if he can or can't help you.