HMRC 46k surprise

connect4master

Hi
Today i recieved a tax bill from hmrc for 46k on predicted earnings from 1999-2005. Because i did not fill in any self assessment forms during my employment as a contractor (i used umbrella services) they are charging me tax on what they think i earned plus of course interest and fines for not doing any self assessment.

I am the first to admit i am not very good when it comes to tax and so choose the umbrella company option when contracting as the agency said i would not have to worry about tax or doing self assessment, of course i believed them.

After speaking to hmrc they said i have not had to do it since 2006 but previous to then i should have been doing self assessment. They said my only option is to fill in online the 2004/5 and 2005/6 years self assessment on the website and then write a letter explaining why i did not do self assessment and include my earning and tax paid for the period 1999-2004.

They may or may not then decide to amend the tax bill, but this sounded a bit like depends who you get and what mood there in on the day.

Has anyone had any experience of having to write to hmrc regarding such an issue and will they amend the tax owed or just make me pay the 46k. Which of course i have not got and would cripple me for however long it takes to pay.

Any advice welcome.
Thanks
Connect4master

Mikeyorks

Get an accountant - a good one.

Pennywise

You need to delve a lot deeper to find out what has happened.

From HMRC to make such a demand, they must have sent you "notices to complete a SA return" for all those earlier years. They will also have sent 2 reminders each year. Presumably you've never received these as if you had, surely you'd have dealt with them. So you need to find out why you didn't get them. Were they being sent to a previous address? If so, did you tell HMRC you had moved - if not, your fault! Or were HMRC simply sending them to a wrong address - if so, their fault! How have they found your current address now? Have you changed jobs again recently, or moved and told them, or whatever?

Also, what was the trigger for them to stop wanting SA returns in 2006? There must have been a reason - did you change jobs or similar?

Is there any tax actually owing for any of these years? Or is it HMRC assessments/determinations (basically their guess-timates) plus fines and interest?

Why were you within the SA regime in the first place? Had you previously been self employed or a company director? If so, were your affairs up to date when you stopped and joined the umbrella? Did you tell HMRC you'd stopped being self employed or a director?

What kind of umbrella was it? Was it a UK based one where you were merely an employee and all your pay was via payslips subject to normal tax and NIC, or were you using an umbrella type arrangement such as a managed service company? Were you using some kind of tax planning scheme such as offshore, employee benefit trust, loan scheme, etc.

If your tax affairs really were up to date, all taxes paid properly, etc., then the chances are that you will be excused this liability if you can prove that everything was in order and you've done nothing wrong or dodgy. BUT, if you are culpable, maybe used a dodgy umbrella tax avoidance scheme that's been proved fail, etc., then chances are some or all of it may be payable, if not more. There's a lot of people liking to lose their homes who've been hit because they used Isle of Man tax planning schemes for example!

You really need to get to grips with every last piece of the puzzle, every last detail, to give yourself your best chance of damage mitigation.

chrismac1

There are lots of potential issues here. Firstly a decent agency would have made sure you - as on the face of it a client at risk for IR35 - had fee protection insurance to cover the costs of any HMRC issues, from the flimsiest fishing trip to a full-blown IR35 investigation. I recommend very strongly to all my clients with a potential IR35 problem that they pay this, so far all of them have. It sounds like you've not paid this.

All the issues Pennywise has raised on how this assessment has come about are relevant. Once again a decent agency will either have you down as "employed" - P60, no need to register for SA - or "self-employed" - please ensure client has UTR and is dealing properly with self-assessment requirements. Bear in mind that the period in question is when IR35 - employment status - cases were THE big deal in town, there is no way any decent agency should have taken any short cuts or failed to communicate properly. So if the agency is still in existence they may have some questions to answer, from you as a minimum and possibly from HMRC too.

I agree that you need to find an accountant you can trust as quickly as possible. Presumably you were paying tax in these years, not just being paid your invoices gross and not filing? So there must have been some tax deduction somewhere, if your agency was running this through a limited company - typically one called Agency Company No. 12345 Limited or similar - you'll have paid coporation tax. This smells to me like a status case, in which case find an accountant who knows the score on IR35 to fight your corner, or at least one who can access specialists in this field.

Whether they amend the tax bill has nothing to do with who you get on the day, and everything to do with producing evidence needed and showing them very clearly you are not going away if you have the law on your side, including case law. As an example, I recently won a PAYE Tribunal where one case officer and 3 senior HMRC people had "reviewed" the case and told my client to pay up, as soon as we filed the Tribunal papers HMRC gave up the case. In many parts of HMRC you find the same level of integrity you find in the Complaints teams of high street banks - i.e. near zero.

connect4master

Thanks for the response, yes i have contacted an accountant and will be seeing them once i have all my paper work in order. I do have P60's for the period refered to plus all my payment week to week from the umbrella management company who i believe are respectable and are happy to supply all the paperwork. I paid NI plus some tax on my earnings but they also payed a dividend each week as well. so i presume i paid tax on the least amount possible.

There are periods i was not even working and also i was out of the country so missing one p60, not sure what to do about that. But basicaly from 99-06 any work i did, i was paid through the management company so there are records of everything i earned and tax i paid. Hopefully this will be enough to be able to put together all the self assessment forms for that period to satisfy HMRC.

Connect4master

Pennywise

connect4master wrote: »

I paid NI plus some tax on my earnings but they also payed a dividend each week as well. so i presume i paid tax on the least amount possible.

And that's the crux of the matter. The word dividend. So you weren't a simple employee of an umbrella. It sounds more like you were a director/shareholder of a "managed service company" where the agency set up a company for you and administered it for you, hence being able to pay dividend. That opens up the IR35 issue. Also, if your total personal income each year was over the higher rate tax threshold, you'd be liable to H/R tax on a proportion of the dividends over the threshold. It also explains the need for SA returns as HMRC require directors to complete SA returns and also HR taxpayers to complete returns.

connect4master

*UPDATE*

Just to update this it turned out after digging and questioning HMRC that the money owed about 47k was in fact not tax at all but fines and interest on the fact that i had not completed any self assesment from 1999-2007.

I had in fact sent HRMC a letter in 99 to tell them that i was no longer self employed but because there records don't go back that far they could not prove that i hadn't.

I had not updated my address with them since i went abroad with work at the end of 99 so did not recieve any mail from them until they caught up with me last year.

Once i made it clear that i would not pay this and would be happy to submit all my accounts for last 10 years and go to court if neccessary they dropped the case and the debt was cleared.

Check check and double check what HMRC say.

Goodluck

Connect4master

suited-aces

Nice to get an update on these threads, and even better when it's a positive one!

LurkerTurnedPoster

From owing 46K to case closed in six posts - that has to be some kind of record. Well done Connect4master. Congratulations.

sorcerer

good news and a valuable lession, always check their "facts" before you pay them.