Tax mess, help me get out of it

David_Felt

I will try to cut a long story short (ask for more detail if you need it and think you can offer any advice):

3 years ago I had my own small business, which didn't make any money (I mean NONE) so we called it a day and I went to work freelance for my first original employer. After a couple of months they asked me to stay on permanent but keep being paid as a sub-contractor (we agree a fee and I invoice them every month), problem arrises when I am an idiot and don't declare tax for first couple of months, and then get into the habit of doing so.

Now I am scared to death that I may go to prison for tax evasion, my girlfriend is expecting our first child and I need to get my head out of the sand and get straight with HMRC, my employer and a couple of other small debts I owe.

Now because I work full time, 9-5 at my employers place of work for the same money paid every 4 weeks, should THEY have been paying my tax and insurance all this time (obviously I realise I shouldnt have left it this long and it is all MY fault, noone elses)?

I can't see a way out of this, I found one website that advises me to send HMRC a letter admitting everything, and they will work out what I owe and because I have contacted them I should just be able to pay outstanding money to them as I am able on a monthly basis, does this sounds right/like good advice to anyone?

I really want to get out of this mess, any ideas? (I'm stupid, I know)

Horace

If you are working for one employer then you are not working on a freelance basis but instead being an employee and as such they are responsible for paying your tax and national insurance. The HMRC will view you as being an employee.

However, if you are free to work for other companies on a freelance basis then you can invoice and pay your own tax and NI.

I would be inclined to ring the HMRC - they don't bite and are actually quite helpful to see what they say.

No point in working yourself up into a lather and fretting about something fairly straight forward.

Savvy_Sue

Welcome David and I agree with Horace, give them a call. I've always been able to do so without initially being asked for my name or other identifying details.

Personally I think your employer has been trying to avoid having you as an employee, which I think would make them liable for the tax. However, if you haven't submitted any tax returns from when you were running your own business, that might make it more complicated because HMRC might want evidence of that. What sort of business was it - were you a sole trader, ltd company or partnership? And how long did you keep it going for? And did you tell HMRC? And how long has the current arrangement been going on for?

nzmegs

There is probably a good chance they will want to audit your business from when it was running and know exactly what you have been up to since. But this is nothing to fear. I would have thoght that it is in their interests to help you pay your debt to them off.

You could always claim that you thought you were employed by the company you are working for and didn't realise you had to pay tax. But to be fair it is almost always better to tell the truth.

Just bite the bullet and call them. this really isn't worth the stress.

donquine

One thing worth bearing in mind, is that where a tax geared penalty is due, no matter how serious the offence, the amount payable will always be reduced for unprompted disclosure.

HMRC will catch up with you eventually. If you're proactive and speak to them before they want to speak to you, you can mitigate the amount they will want you to pay them.

If you don't know anything about tax, it may be worth engaging an accountant or tax adviser to help sort out your tax affairs. It will cost you money of course, but you sound like this is weighing on you and a professional's help may make you sleep easier.

Whether or not you choose to engage a professional, don't bury your head in the sand. Talk to HMRC.

Annisele

You might benefit from talking to Tax Aid (they're quite legitimate - HMRC's guide on undeclared income points to them).

HMRC are *highly* unlikely to prosecute you if you tell them that you've underpaid tax. That would be seriously counterproductive; they want to encourage people like you to come forward so prosecuting you when you do would be idiotic.