Not paid tax/ni/vat for 14 years..

snowballfight

Hi,

Please help. I am in need of some urgent advice re a family member who has unknowingly to us gone completely and utterly rogue with his finances.

He is an older gentleman with absolutely zero financial insight. He is self employed in the farming industry.

We only became aware of his problems 3 days ago when his house was re-possessed, the locks have been changed and he can no longer gain access.

In our attempts to rectify the re-possession it has transpired that he has not only failed to pay income tax/ni for 14 years but he has also being adding VAT to his invoices, despite not being VAT registered for the previous 14 years.

We are very very angry with him, we were initially going to pay the arrears on the mortgage until the above information was known to us. He is clearly in a great deal of trouble, and we are booked into the CAB in a weeks time. We have told him that this absolutely must and will be reported to HMRC, we will ensure that it is.

He owns around 30k worth of farm machinery and may have up to 30k due from the house sale. All of this will obviously need to be put towards his debts. However, the reality is that he will never be able to pay what he owes, back dated income tax alone is likely to exceed 100k.

My question is, is prison likely?

What would a typical response from HMRC be in this type of scenario?

Thanks

PlutoinCapricorn

I have seen a few people come forward in the past and ask about this: they are always advised to get in touch with HMRC and confess. Not only must they pay all tax and NI owed, but also penalties and interest.

The penalties may be reduced for people who report themselves and cooperate and have records that make it easier to decide how much is owed. However, the amounts you mention are much higher than for the previous posters.

Unfortunately, despite being asked to let us know how they got on, these people never came back to say what happened - perhaps they carried on and hoped for the best.

VAT is something else - I thought that VAT checks were done to prevent unregistered people charging.

You really do need expert advice: prison may be a last resort.

snowballfight

Thank you, I WILL keep you posted with the response from HMRC so in future there is something to reference.

He has been such an idiot, we are still in shock.

He simply will never be able to even remotely pay back what he owes.

xylophone

In our attempts to rectify the re-possession it has transpired that he has not only failed to pay income tax/ni for 14 years but he has also being adding VAT to his invoices, despite not being VAT registered for the previous 14 years.

It sounds horribly like deliberate fraud, in which case HMRC are likely to take a robust view of the circumstances?

I would imagine that this could involve a prosecution and a fine at the least?

snowballfight

xylophone wrote: »

It sounds horribly like deliberate fraud, in which case HMRC are likely to take a robust view of the circumstances?

I would imagine that this would involve a prosecution and a fine at the least?

Yes, I think this is a clear case of fraud. He has knowingly not paid taxes, this is unfortunately the truth of the matter. Its clearly also not right that he should add 20% VAT to someones bill, what amazes us is that this was not picked up sooner, surely when x claims back their VAT against his invoice?

He was completely oblivious to the seriousness of it all, its starting to register now.

xylophone

Perhaps the customers aren't eligible to reclaim VAT?

He is completely oblivious to the seriousness of it all.

He might well be in shock as well- finding that you can't enter your own home might well induce panic and what they call "denial"?

PlutoinCapricorn

I suppose that HMRC know what to look for, and would be far more lenient with someone who occasionally sold home-made cupcakes for a year or two and really didn't realise that it was necessary to register as self employed than with someone who deliberately added VAT to invoices.

What was he doing before the most recent 14 years - has he been "off the radar" for the whole of his working life? This sounds much more serious than the cases previously reported on MSE.

I have never understood how people can live with the possibility of discovery hanging over them.

snowballfight

PlutoinCapricorn wrote: »

I suppose that HMRC know what to look for, and would be far more lenient with someone who occasionally sold home-made cupcakes for a year or two and really didn't realise that it was necessary to register as self employed than with someone who deliberately added VAT to invoices.

What was he doing before the most recent 14 years - has he been "off the radar" for the whole of his working life? This sounds much more serious than the cases previously reported on MSE.

I have never understood how people can live with the possibility of discovery hanging over them.

From what we can work out, by looking at his boxes and boxes of old and often unopened mail he failed to send back a tax return 14 years ago and just "left it at that"..which is truly incredible.

As to how he can live with this hanging over him? I'm not sure, and although it sounds awful he isn't a very complex person, which is why we still have some sympathy towards him.

He has some other debts credit cards etc but I guess they are at the back of the cue.

PlutoinCapricorn

Once HMRC know that someone exists, they normally keep sending mail to them if they lose contact.

Are you saying that he was registered as self employed and completed tax returns until 14 years ago?

HMRC used to go back 6 years - now 4 - but I believe that in cases such as this they may go back further.

snowballfight

PlutoinCapricorn wrote: »

Once HMRC know that someone exists, they normally keep sending mail to them if they lose contact.

Are you saying that he was registered as self employed and completed tax returns until 14 years ago?

According to him yes, Its crazy I know. Perhaps after he failed to respond over the course of several years they ceased to contact him?

HMRC used to go back 6 years - now 4 - but I believe that in cases such as this they may go back further.

I did a quick calculation re the tax he may owe going back 14 years..it could be 200k plus, and yes im sure they will make and exception by going back further, considering.

Im unsure how HMRC would calculate his earnings. His mortgage is self certified (this is another issue), I wonder if they would calculate his income from his declared income re the mortgage?

If anyone knows what the possibilities of a custodial sentence are? It would be good for him and the rest of the family to be able to brace themselves.

xylophone

From what we can work out, by looking at his boxes and boxes of old and often unopened mail he failed to send back a tax return 14 years ago and just "left it at that"..which is truly incredible.

To be fair, it is not only the old and "innocent" who can do this - in my experience, there are people who groan when the SA return arrives, and tell themselves they'll do it "tomorrow" and tomorrow never comes and so it goes on.

However, in this case, it is not just a matter of not filing returns; even if HMRC regarded the failure to pay tax/NI as simple neglect, the adding of VAT to bills when he was not registered does look like deliberate fraud, which they are likely to view in a much more serious light?