Please help, i'm in a LOT of trouble :(

Joe517

Hi guys, heard about this place and thought id try you out! I have been excrutiatingly stupid and i am going to get counselling for it and some other stuff but this is the ££ part that im asking for help with. I'll try and keep it short as its very boring and im sick of even thinking about it but its taken over my whole life.

In Jan 2003 i left my full time sales job to persue a self employed/freelance sales career. I have been working for a local company on this basis since then and invoice them monthly for earnings, which includes hourly pay and comission.

The first 2 years i earned about 50k and the last couple about 30k, but this year its gone down a bit and i get about £1500 a month. I started geting cheques paid to me then cashing them, then in the last 2 years i have had them paid into my bank account, I have no other money coming in or paid to me.

Heres the problem: I have never filed an income tax return and have paid nothing in the way of NI or anything else. I registered initially as self employed and thats it - they dont have any record thus far of my earnings.

I have looked online and spoken to a few people who have just said "go bancrupt" which is the sensible idea i think, so im asking:

a) Is it good idea?

b) What possible excuse can i give to the tax man other than i have been a complete and utter mentalist. What will happen to me? Could i go to jail?

c) Will the company i freelance for be informed? Will they

d) If i take on a new job (i have been headhunted by a good comapny and its a full time role), then will they know whats happened?

I just HAVE to come clean now - its beyond a joke and i want my life back. Im really really worried and have gone from the most confident, outgoing, care-free person i know to a very very worried stupid one one in 4 years and i hate it.

I have no excuses at all, but i really want to sort this out now.

Please help me if you can before i take the next step.

Joe (((((((((((((((((((((

nealnomoney

Why would you need to go bankrupt? Dont listen to what people tell you. You need to get your tax returns for the last few years filed. Go see an accountant. Do you have any expenses you can offset against your self employed income?

Hoddie_2

a) Is it good idea?

If your only reason for doing so is to avoid paying the tax and National Insurance due then no. This may not even be an option if you have property or a good income source, and you'd still have to file the outstanding SA returns in any case.

b) What possible excuse can i give to the tax man other than i have been a complete and utter mentalist. What will happen to me? Could i go to jail?

Jail, no. Financial penalties almost certainly.

c) Will the company i freelance for be informed?

No. It has nothing to do with them, aside from the fact that you sound more like an employee than self-employed. Your affairs with HMRC are between you and them, and they are legally prevented from telling anyone other than for prevention of fraud or other illegal activities, or if a court gives them the right to do so (such as to engage baliffs).

d) If i take on a new job (i have been headhunted by a good comapny and its a full time role), then will they know whats happened?

If you were made bankrupt you'd have a NT code against any employment income. This is normally only used for bankrupt individuals but does have other uses. Any prospective employer might guess you're bankrupt but you don't have to confirm it and HMRC will never disclose the reason for an NT code to an employer.

As nealnomoney states, your best bet would be to engage an accountant to sort this out for you. This would achieve two things - it'd almost certainly be right first time, they could tell you what you owe before they submit anything to the Revenue, and it would minimise your contact with HMRC which, given your post, would be good from a stress level point of view!

mor7s_2

"If you were made bankrupt you'd have a NT code against any employment income. This is normally only used for bankrupt individuals but does have other uses. Any prospective employer might guess you're bankrupt but you don't have to confirm it and HMRC will never disclose the reason for an NT code to an employer."

Sorry to contradict but an NT code stands for "No Tax" and is generally reserved for those fortunate enough not to be liable to UK PAYE, i.e. non-resident expats etc.

Let's say you did owe the taxman money from your self employment (and who is to say you were genuinely self employed at this stage - it could be the company you worked for wanted to avoid the 12.8% Employer's NIC charge they'd face if you were 'on the books' and you being self employed suited them more than you!), your new employer would know nothing about it. A PAYE code is just that, a code so your employer has no idea what personal circumstances you may have and how it is made up.

In general if you owe HMRC money from self employment they would pass it to the collector of taxes who would pursue it. Ideally you then agree with them time to pay etc (would incur interest though) and settle up in instalments like any other debt, it is not automatic that they take more tax from your new job to offset the money you owe. Don't default though or the deal is off and they will be after payment in full. Going bankrupt won't remove the tax debt and they'll pursue it from your other assets etc, but good news is nowadays I don't think HMRC are a 'preferential creditor', i.e. they get first call.

I can't agree enough with the post to go see an accountant, most high street accountants will give you up to an hour of their time for free and chat to you. Ok the fees start running when they start acting for you, but a good enough will pay for themselves by reducing your tax bill by more than they charge.

Hope this helps
mor7s

Hoddie_2

Sorry to contradict but an NT code stands for "No Tax" and is generally reserved for those fortunate enough not to be liable to UK PAYE, i.e. non-resident expats etc

Sorry to contradict your contradiction but the NT code is most commonly used where a person has been declared bankrupt. As you say, HMRC no longer have preferential creditor status and so are not allowed the advantage of deducting tax before the official receiver divvies up any on-going source of income between the individual (for living expenses) and their creditors.

The next most common use is for pensioners who pay all their tax on a particular source of income, and have the NT code applied to another source of income such as a small annuity.

Then you have non-residents and the rest .

The second use will shortly cease to exist as HMRC will soon start issuing tax codes with 'allowances allocated here' to small pensions and annuities, even if the result still means that no tax will be payable.

David170607

Joe

I am hoping you went to see a qualified accountant or qualified tax adviser on Friday and they have already made a notification to HM Revenue & Customs for you under the so-called tax amnesty.

The amnesty arrangement officially closed at midnight on Friday 22 June.

However if you have not yet done anything then get it sorted first thing Monday morning and you might be allowed to make a late notification.

Your income does not include any offshore element, so your application would not be under the offshore amnesty. Instead you would be applying under the parallel arrangement which offers the same deal on the same terms to those who have tax irregularities (a polite word for evasion) which are not connected to anything offshore.

The amnesty deal was:
(i) you notify HMR&C that you have something to disclose by 22 June (but provide no details at this stage);
(ii) you send in full details of all your undeclared income (and taxable gains etc if you have any), the tax liability on it and interest due on that tax (HMR&C provide tables to help you) by 26 November (your accountant can work all the figures out for you);
(iii) you pay the tax, plus an extra 10% of the tax (as a penalty); plus the interest on the tax by 26 November;
(iv) in most cases, that's it! HMR&C will let you know if they need to ask you any questions by 30 April 2008.

There is some guidance you can download from the HMR&C website at www.hmrc.gov.uk (look under Offshore Disclosure Arrangements).

You can also phone the number shown there 0845 302 1401 (8 a.m. to 8 p.m. - even on a Sunday!).

If paying all the tax etc by 26 November is the only problem HMR&C might negotiate a deal with you allowing you longer to pay (but charging you extra interest). However they would normally expect you to go to a bank to borrow money so that you can pay them on time.

If you don't disclose under this arrangement then:
(a) you may well get a higher penalty than 10% (the maximum is 100% but you should be able to get less than 40%);
(b) you will get asked a lot of questions about your financial affairs (because if you failed to declare this who knows what else you might have failed to declare?)
(c) so it will be a lot more hassle :sad: .

David

Elaine_Wilson

That was a good suggestion from David. I hope you managed to take advantage of that opportunity.

I just want to make one comment in case you have not done anything yet. I would try to get all this in motion before you start a new job. Once you start you will not be able to provide a P45 (as you were self-employed) so will be asked to complete a P46. This will then be sent to the Revenue so you will pop up on their radar then.

If you have already come clean then you will be able to argue down the level of penalties further. (I'm assuming you do not get allowed the 10% "amnesty" here)