HMRC Self assessment fine issues

Evavu

Hi,
I need some advice! About 3 years ago I started to set up a business with a friend but backed out due to personal issues. I had registered as self employed but didnt earn any money. Recently I tried to claim some tax back from while I was temping. I had to do 2 self assessments for them to correct their records, and I worked out that I was owed about £1000 tax back over those 2 years of temping. Unfortunately though, they have been sending me back fines from the years that I apparently didn't send in Self Assessment forms. They never sent me any correspondence saying that I had to fill in tax returns until recently, and now that I have finally got my tax back, they have taken off the £300 I incurred as fines, even though I was not working as self employed and was never sent self assessment forms!
Can they do this? I'm pretty p*d off as I dont see why I should have to pay these fines as I didnt have any earnings to declare, and by the standards set out on their website over those 2 years I didnt even classify as someone 'self employed' and was an employee. This was also agreed on by the girl I spoke to at the HMRC and she confirmed that I shouldnt have the pay these fines. Do you think I should appeal these fines? Help! Has anyone else been in this situation?
Eva

chrismac1

Possibly the simplest solution is to submit tax returns for those years. No tax bill means no fines, so the fines will disappear off the system once zero bill tax returns are filed. the long way round is to attempt to get anyone in HMRC to lift a finger either by phone or letter. If you achieve this please tell me the secret!

dori2o

Evavu wrote: »

Hi,
I need some advice! About 3 years ago I started to set up a business with a friend but backed out due to personal issues. I had registered as self employed but didnt earn any money. Recently I tried to claim some tax back from while I was temping. I had to do 2 self assessments for them to correct their records, and I worked out that I was owed about £1000 tax back over those 2 years of temping. Unfortunately though, they have been sending me back fines from the years that I apparently didn't send in Self Assessment forms. They never sent me any correspondence saying that I had to fill in tax returns until recently, and now that I have finally got my tax back, they have taken off the £300 I incurred as fines, even though I was not working as self employed and was never sent self assessment forms!
Can they do this? I'm pretty p*d off as I dont see why I should have to pay these fines as I didnt have any earnings to declare, and by the standards set out on their website over those 2 years I didnt even classify as someone 'self employed' and was an employee. This was also agreed on by the girl I spoke to at the HMRC and she confirmed that I shouldnt have the pay these fines. Do you think I should appeal these fines? Help! Has anyone else been in this situation?
Eva

Lets look at the facts.

You registered as self employed. You then decided not to go through with it. HMRC issued the tax returns and you didn't complete them.

How exactly are HMRC supposed to know that you didn't trade, or that you have ceased self employment?

Whether or not you actually traded is not the point, once you have registered HMRC will require you to complete a tax return for that year in question. On the return you have the chance to state when you became self employed and when you ceased being self employed. This will then enable HMRC to update the records for future years.

In order to solve the problem of the fines you need to fulfil your obligations and complete the outstanding returns.

If there is no tax to pay then the fines will be reduced to nil.

suso

chrismac1 wrote: »

Possibly the simplest solution is to submit tax returns for those years. No tax bill means no fines, so the fines will disappear off the system once zero bill tax returns are filed. the long way round is to attempt to get anyone in HMRC to lift a finger either by phone or letter. If you achieve this please tell me the secret!

"I started up a business with a friend," means its a partnership, partnership returns never filed, penalties not cancelled,

Were HMRC ever informed the partnership was cancelled ?

Did the filing partner ever complete the returns, was an end date to the partnership ever record on the returns, or were they simply empty returns submitted?

I do not believe that you have had tax back when there were personal tax returns outstanding, especially as you say they have deducted the 300 pounds worth of fines from the reund, this does imply that you have submitted individual tax returns and the penalties for the partnership returns have not been cancelled. (which is correct)

dori2o

suso wrote: »

"I started up a business with a friend," means its a partnership, partnership returns never filed, penalties not cancelled,

Were HMRC ever informed the partnership was cancelled ?

Did the filing partner ever complete the returns, was an end date to the partnership ever record on the returns, or were they simply empty returns submitted?

I do not believe that you have had tax back when there were personal tax returns outstanding, especially as you say they have deducted the 300 pounds worth of fines from the reund, this does imply that you have submitted individual tax returns and the penalties for the partnership returns have not been cancelled. (which is correct)

Nicely picked up. I missed that one.

Can the OP confirm if these are partnership penalties.

chrismac1

If these are partnership penalties you'll need to throw yourself on the mercy of HMRC. So you're pretty stuffed, cough up and make sure the partnership is cancelled going forward.

Pennywise

If you can prove that the partnership never existed, you should be able to get the fines cancelled.

It's not a question of whether/when you told HMRC that the partnership ceased - that's a red herring.

It's a matter of reality as to when the partnership ceased. HMRC can only demand partnership tax returns for the period during which the partnership existed.

You need to appeal on the grounds that there never was a partnership, hence no partnership returns were needed, hence there cannot be late filing penalties.

Initially registering for self employment and telling HMRC you were starting a partnership isn't a legally binding fact that makes the partnership a legal reality. You still have to actually start being a partnership, i.e. opening a joint bank account, selling stuff, buying stuff, incurring expenses - if you didn't do anything other than talking/planning and registering with HMRC, the legally, you were never a partnership in the first place and you should be able to get HMRC to cancel the partnership tax record completely, including withdrawal of the late filing penalties.

If you did have transactions in the first year, then the p'ship late filing penalties would stand and you'd need to ask nicely for a discretionary withdrawal of the fine, but for the second and later years, if there was no partnership, there can be no fines for not submitting a tax return for a partnership that didn't exist - that's not discretionary - that's a legal fact!

Don't let HMRC argue that it's all your fault because you didn't tell them - total rubbish - if you didn't have a partnership for any year, then HMRC can't impose a requirement to file a p'ship return nor raise penalties for not doing so - all you have to do is prove to them that a partnership didn't exist.