Dealing With Huge Tax Return Fines

Candydj

Hi,

I have read through past threads on this but none relate to Self Employed people who have had no income but have incurred fines.

My friend is a self employed musician who basically completely under estimated the importance of filing a tax return each year.

He initially had an accountant when he was signed and paid tax 08-09 and 09-10. He was back forth to America during this period too but returned when the deal dint go to plan. His account ran a mile so since then he has ignored all letters from HMRC foolish but unfortunately when your in a hole your in a hole.

I have completed 4 tax returns 10-11, 11-12, 13-14, 14-15 and he now has a penalty fine totalling £6370.72

I am unsure how to proceed as he clearly has made hardly anything, just enough to get by, and using the money he had initially paid tax on. Is it possible to get any of this wiped as none of it is outstanding tax?

Can you appeal based on depression as I think he has been suffering with this. Also when he has tried to call HMRC they offered no assistance, and on trying to complete the assessment online he was completely overwhelmed.

Any help on this would be greatly appreciated

Thanks

agrinnall

Unless you are his psychiatrist your diagnosis of depression is meaningless. He owes the money, he should pay it if he has the resources to do so, if not then he will need to talk to HMRC about his options. If he doesn't take the initiative on this then he'll find himself in court facing even bigger fines.

booksurr

whether he does or doesn't owe tax is irrelevant as to whether he should or should not have filed tax returns on time. He clearly was required to do so but hasn't, therefore the fines are for that failure and are based on a set scale of escalation as explained in the letters he chose to ignore.

He will have to deal direct with HMRC and attempt to convince them to allow him time to pay https://www.gov.uk/difficulties-paying-hmrc/overview

Cook_County

Has your friend filed his US tax returns and FBARs for the periods he was in America? These could also generate significant penalties if they are now late.


Assuming you have completed the UK returns correctly you may have some liability for any penalties; you'd have to read your agreement with your friend to establish what was agreed between you and when.


Is there reasonable excuse for the late UK filing?

Pennywise

He MAY get leniency due to depression, but only if he can back that claim with evidence, such as a GP letter. If he didn't get a diagnosis/treatment for depression, then he hasn't a leg to stand on - anyone could try to wriggle out of their responsibilities by claiming some kind of illness. HMRC aren't stupid, if someone claims grounds for excuse, then they will require evidence.

chrismac1

I'm trying to remember when was the last tax year that a Nil tax bill meant that all fines were also wiped. Maybe Pennywise can remember, I think it was either 2010-11 or 2011-12. Whichever tax year it was, if he had a nil liability for any year up to that point then all fines should be wiped. Since then these hefty penalties are usually - but not necessarily - a done deal.

He's not alone in having a very low tax bill and a ridiculous level of penalty - though I am assuming here the tax bill overall is under £500. You don't mention how much in all it was, this could be crucial.

The reason is that these stupidly inflated penalties have been tested in Tax Tribunals, and posisbly also in the Courts. In at least one Tribunal the entirety of the fines were wiped, so the starting point would be to find that Tribunal and compare the specifics of that case to that of your musician friend.

Maybe an accountant who specialises in this area would take on the case, but I doubt it if there is no money to pay the fees. So it might be down to finding any relevant precedent rulings, writing to HMRC with this and asking for mercy.

Depending on the level of assets, a visit to an insolvency practitioner for a free consultation might also be a good idea - or Citiizen's Advice. I've seen bankruptcies for less, and this £6k balance is only going to grow.

sheramber

I'm trying to remember when was the last tax year that a Nil tax bill meant that all fines were also wiped. Maybe Pennywise can remember, I think it was either 2010-11 or 2011-12.

Last year was 2009/10. New charges applied from 2010/11 return.

csgohan4

If you had no income, therefore no tax, however if you don't file your tax return you will incur penalties.


There is a difference here between filing late tax return penalties and undeclared income and incurring more penalties


I am afraid he has reaped what he has sown. Burying his head in the sand will not make the HMRC go away.


I suggest he should get a grip of his accounts as you doing it for him will not help matters.

[Deleted User]

I don't know what anyone else thinks but the size of the 'penalty ' suggests to me that HMRC may have issued a determination for at least one year - 2010/11 falls out at the end of January. Perhaps the op can clarify?

Cook_County

The individual could seek the help of Tax Aid; BUT he MUST also deal with US tax filing as failure to file in the States might be a criminal offence. Tax Aid cannot assist with this.