Why are self employed treated more harshly by HMRC?

Monkey_Joe

Im employed and I discovered last week that I owe £2400 worth of tax over three years; cut a long story short but they have agreed to let me pay this in instalments over 3 years interest free. The underpayment is due to my employer not sending my P46 and P11D to declare company car and benefits.

Whereas, a friend of mine, who is self employed was accused of owing £6000 worth of extra tax and was forced to pay the entire amount immediately within 30 days including interest that had accumulated.

Why were we treated differently?

Hammyman

As an employee, the likelihood is that an error is not of your own making.

As a self employed person, you are wholly responsible. And to be "accused" of owing extra tax suggests they carried out an investigation and decided they had been fraudulently evading tax or applying claimable relief that didn't apply.

Monkey_Joe

Hammyman wrote: »

As an employee, the likelihood is that an error is not of your own making.

As a self employed person, you are wholly responsible. And to be "accused" of owing extra tax suggests they carried out an investigation and decided they had been fraudulently evading tax or applying claimable relief that didn't apply.

Thanks

Just find it odd since my friend had to take a loan out to pay what he owed the tax office office. Maybe Im mistaken, since they often ask self employed to pay in advance tax for the following year and so he could not afford it and had to take a loan. Even then its still harsh to ask someone to pay that much in advance since he has not earned the money yet to be taxed on.

POPPYOSCAR

Monkey_Joe wrote: »

Thanks

Just find it odd since my friend had to take a loan out to pay what he owed the tax office office. Maybe Im mistaken, since they often ask self employed to pay in advance tax for the following year and so he could not afford it and had to take a loan. Even then its still harsh to ask someone to pay that much in advance since he has not earned the money yet to be taxed on.

Yes that is how the system works you pay each january and july and pay some in advance and the rest is a balancing payment.Being SE he should have been putting aside for the tax.If business is bad and he could not afford it and would not have had the same income(lower) the following year he could have made an application to pay a reduced amount/nothing at all on that basis.

suso

Monkey_Joe wrote: »

Thanks

Just find it odd since my friend had to take a loan out to pay what he owed the tax office office. Maybe Im mistaken, since they often ask self employed to pay in advance tax for the following year and so he could not afford it and had to take a loan. Even then its still harsh to ask someone to pay that much in advance since he has not earned the money yet to be taxed on.

he has earnt the money on which he is being asked to make Payments on account

eg currently he should have made a first payment on account for 2010/2011 .

This was a payment for the first 6 months worth of tax for the last tax year.

In July he will make another payment on account for the last 6 months worth of tax for 2010/2011, nearly 4 months after the work has been done, so nobody is being asked to make payments before the work is done

If business has been slack in the last year, the payments on account can always be reduced, simply contact HMRC advise them of a figure and a reason