Tax credits and self employment

jampratt

If a person is receiving tax credits and is self employed are they automatically registered as self employed with HMRC or do you have to register with them seperatly?

HappyMJ

You must register as self employed before claiming tax credits. Don't worry too much just do it now.

jampratt

HappyMJ wrote: »

You must register as self employed before claiming tax credits. Don't worry too much just do it now.

Ive been getting tax credits for nearly 4years, but ive never actually registerted as self employed with HMRC, I just presumed it was one and the same since when i fill out my tax credit claim i declare income etc?

Hammyman

Oh dear, you're really in the doo-dah. You have not registered as self employed, you've not been paying Class 2 NIC as a result and also no completing a self assessment and therefore also not paying tax. You have been breaking the law and are committing tax evasion.

I would contact the HMRC helpline for the self employed NOW and explain your situation - 0845 915 4515, open from 8.00 am to 8.00 pm, Monday to Friday and 8.00 am to 4.00 pm on Saturday. Prepare yourself for a fine. Also make sure that all your accounts are in good order because if you can't prove your income and expenses, HMRC will decide what you've earned based on the averages of similar businesses in your area which means you will get a tax bill based on that and you can't dispute it if you have no accounts.

Ignorance is no defence. Admitting guilt off your own back will go in your favour.

HappyMJ

jampratt wrote: »

Ive been getting tax credits for nearly 4years, but ive never actually registerted as self employed with HMRC, I just presumed it was one and the same since when i fill out my tax credit claim i declare income etc?

Have you been paying national insurance and filling in self assesment tax returns? You could get a fine for late registering.

edit: as hammyman says...

jampratt

I wouldnt of been paying tax anyway as i am earning well below the personal allowance, only around 3k per annum plus tax credits, i will sort it asap, do you guys know what sort of fine i can expect?

HappyMJ

jampratt wrote: »

I wouldnt of been paying tax anyway as i am earning well below the personal allowance, only around 3k per annum plus tax credits, i will sort it asap, do you guys know what sort of fine i can expect?

Are you ready?

A £100 fixed penalty PLUS £10 for each day the tax return is late up to £900 PLUS £300 if over 6 months late. It's likely they will write some of that off though. http://www.hmrc.gov.uk/sa/deadlines-penalties.htm

Also, a £100 penalty for the previous years and another £100 for registering your self employment status late.

Plus all the national insurance and income tax due plus interest.

Hammyman

You say you are earning £3k but do you have a set of accounts to prove this along with copies of invoices for work you've charged for and the original receipts for expenses you've claimed?

As I said earlier, without these HMRC will calculate what they think your income was if they decide that what you claim you earned is too low and they will send you a bill based on that calculation.

System

I don't want to worry you but I would be concerned about the Tax Credit Office too if I were you .
Somewhere along the line they expect what you declare to them each year on your Tax credit declaration to match a tax return submitted by you to the Tax Office under self-assessment. When Tax Credit compliance notice that you haven't filed tax returns it is likely they will investigate your claim and expect you to provide proof of your earnings, expenses, advertising, hours worked, client names etc. I have seen claimants come into the enquiry centre with letters from the Tax credit office asking them to provide such proof.