HELP! Under Investigation from HMRC

Hi there,

I am a sub-contractor in the construction industry and file my own self assessment returns. I have been doing this for the last 8 years since my own accountant at the time got me into trouble.

I have just received a letter form HMRC stating they are carrying out a Compliance Check under section 9a of the Taxes Management Act 1970. They are investigating my most recent tax return for year ending 2014.

They are investigating my income of c.£60,000, my total tax paid c.£12,000 and my total expenses claimed of c.£19,000.

They have requested copies of all of my private or business bank accounts sole or joint in which business income is deposited or business expenses are paid from. They also require all documentary evidence to support my expenses.

The long and short of it is that I am screwed, I have not taken enough care with recording and documenting the expenses and I only have myself to blame. I have claimed over £9k in travel costs and have only just realised that I can't claim for home to work travel!! I have also claimed £1,900 for a home office (I use about an hour in each evening) and have just realised I am entitled to claim about £4pw! I always added up my total utilities expenses and divided by the amount of rooms in my house, I now realise that this was probably not a realistic and fair method. I have over £5,000 in expenses such as tools etc that I can't find paperwork for.... basically I'm screwed! I'm not blaming anybody, it's my own fault.

I have spoken to two accountant firms over the phone and have meetings with each scheduled for next week. One the accountants told me over the phone that HMRC can actually go back 20 years on me. They will also add penalties and interest.

All I want to know is whether anyone has had any experience in this type of investigation and whether they will go back this far. At the moment, I am going to find it hard to demonstrate the authenticity of any of my expenses and I figure I will probably end up having to pay back £5,000 for that year alone. What is the chances they will go back 20 years??

Any advice would be greatly appreciated.
«134567

Comments

  • I hope that a tax expert will come along soon, but just wanted to say that this could be an enquiry, and they will perform a full investigation if they are not satisfied with the most recent return and have reason to believe that there is some unpaid tax they could get.

    Not having receipts for genuine expenses is one thing; overclaiming or claiming expenses that do not qualify is something else.

    If you co-operate fully, the penalties may be lower than if you tried to hide the evidence.
    Who having known the diamond will concern himself with glass?

    Rudyard Kipling


  • Who having known the diamond will concern himself with glass?

    Rudyard Kipling


  • In your position, I would Google "HMRC investigation". There is a lot of useful background information out there, including this:

    "If there have been no mistakes and your paperwork and accounting is in order they are not allowed to look into earlier years – though they may still try it on.
    If there has been a mistake (and you can prove this is not down to your negligence) then they can go back four years.
    If the underpayment has been made because of your negligence (for example you weren’t keeping proper records) HMRC can go back six years.
    If HMRC believe you have deliberately set out underpay tax illegally they can try to go back twenty years."
    Who having known the diamond will concern himself with glass?

    Rudyard Kipling


  • Thanks Pluto. I have been Googling all day!
    Just wondering if anyone else had first hand experience?
  • densol_2
    densol_2 Posts: 1,189 Forumite
    Ive just ordered " tax saving tactics for small business" from Tax Cafe - its very very good. I recommend you read it as it will tell you what you can and cannot claim for. Try not to panic - it may not be as bad as you think
    Stuck on the carousel in Disneyland's Fantasyland :D

    I live under a bridge in England
    Been a member for ten years.
    Retired in 2015 ( ill health ) Actuary for legal services.
  • keaton
    keaton Posts: 183 Forumite
    In your position, I would Google "HMRC investigation". There is a lot of useful background information out there, including this:

    "If there have been no mistakes and your paperwork and accounting is in order they are not allowed to look into earlier years – though they may still try it on.
    If there has been a mistake (and you can prove this is not down to your negligence) then they can go back four years.
    If the underpayment has been made because of your negligence (for example you weren’t keeping proper records) HMRC can go back six years.
    If HMRC believe you have deliberately set out underpay tax illegally they can try to go back twenty years."


    To go back 20 years I'm sure the person would have to have been self employed that long, wouldn't they? Though iI'm probably wrong.
    Chances are I'm in this thread asking questions as I love to learn new stuff. (Did you know all polar bears are left handed?)
  • Hi Densol,

    Thanks for the advice. Unfortunately I think I'm beginning to learn the gist of allowable expenses a little too late! The damage is done and I am looking for a way I can limit my own liabilities at this stage, quite possibly I do not deserve that. :(
  • keaton wrote: »
    To go back 20 years I'm sure the person would have to have been self employed that long, wouldn't they? Though iI'm probably wrong.

    I've been self employed 19 years.
  • Have you looked at/considered joining the TaxationWeb forum? I found this:

    "HMRC often tell people that they cannot have tax relief for expenses for which the invoices have not been retained. There is no rule in tax that says this, and Inspectors of Taxes are forced to admit this fact when challenged. I mention this as one reason why you need advice from a specialist who is used to dealing with investigations - i.e. to make sure that HMRC don't take advantage of the fact that you don't know the rules."
    Who having known the diamond will concern himself with glass?

    Rudyard Kipling


  • meer53
    meer53 Posts: 10,217 Forumite
    Tenth Anniversary 10,000 Posts Combo Breaker
    My ex was self employed in the construction business too and HMRC called us in for an "investigation" We also had a visit from the VAT inspector too, that was more scary than the HMRC visit. We ended up with a tax refund of £14k although my ex's turnover was into 6 figures.

    Be honest with them, take everything you can find, we took our accountant with us too, having someone with you who knows the way HMRC work is helpful. Do you have anyone you can take with you ? Trying to bluff your way out of it won't work, i hope it goes well for you.
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.3K Banking & Borrowing
  • 252.9K Reduce Debt & Boost Income
  • 453.2K Spending & Discounts
  • 243.3K Work, Benefits & Business
  • 597.9K Mortgages, Homes & Bills
  • 176.6K Life & Family
  • 256.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.