HMRC Sent me a Letter re Unregistered Business

Barney_Rubble_0403

Whoops.... If there is no documentary evidence on earnings, they will apply their own calculation and penalties.

kazwookie

Also no paperwork, 'could' also lead to thoughts of money laundering


There should be paperwork for 'goods in' that are used in the treatments or what ever

powerful_Rogue

Astar1809 wrote: »

ANY amount of additional income is subject to Tax and NI, most people will forgive £50 here or there but £30,000 a year is well beyond reasonable doubt and if I am honest does not sound truthful, I think you knew your were committing tax evasion

Not that it helps the OP, but you can earn upto £1000 per year tax free as a hobby with no need to do a self assessment.

haras_nosirrah

https://www.grantthornton.co.uk/insights/how-does-hmrc-know-i-have-undisclosed-income/

you have probably been caught by them trawling facebook looking for business owners who aren't declaring - a lot of people involved in mlm type businesses should watch their backs especially if claiming to be receiving thousands of pounds a month but declaring little profit.

Pennywise

haras_nosirrah wrote: »

https://www.grantthornton.co.uk/insights/how-does-hmrc-know-i-have-undisclosed-income/

you have probably been caught by them trawling facebook looking for business owners who aren't declaring - a lot of people involved in mlm type businesses should watch their backs especially if claiming to be receiving thousands of pounds a month but declaring little profit.

I remember many years ago, I acted for a pub who got investigated by HMRC. There'd been a local tax inspector who'd been going in and jotting down the number of people putting money into the pool table, gaming machines, cigarette machine, and then comparing it to the declared income a year later when the accounts/tax return was submitted to them.

He also kept a log from death notices in the local paper to check the books of local funeral directors, old folks homes, etc., and got rich pickings with one old folks home who had 13 letting rooms but only ever put the income through the books for 10 of them - he could prove via the death notices that there were more people living in the home than was being declared for.

OrderfromChaos

In the late 90s I worked as a business advisor and was referred to a person with a similar predicament.

The client had returned to the UK after a period of years working overseas and had established a sole trader business. By the time it became established it was generating profits in the region of £50,000 per year pre-tax. The owner had registered as self employed but no tax office ever made contact. Sleeping dogs were left to lie with the stated intention of “sorting it all out one day.”

Time flies, as it does, and when I was introduced not a penny of income tax had been paid for six or seven years.

Fortunately I had some very well qualified friends and business colleagues and one in particular worked as a tax specialist and gave me the following advice: “If the Inland Revenue approach any party to investigate their tax affairs, be sure to identify every single £1 that has been paid into any of your bank accounts and explain its origin. If it is business earnings/profits, say so. If it is a loan from a sibling, say so. If it is a gambling windfall, say so. (But be prepared to show HMRC the winning betting slip). WHATEVER YOU DO, DO NOT FAIL TO MENTION ANY RECEIPT. You can argue about deductible expenses later.”

The purpose of taking this approach is cold hearted, properly selfish self-preservation. You need to establish with the HMRC that you have made a mistake, you are remorseful and you want to make things right. Establishing that you are truthful is the ONLY way you will do this.

I started to help my client and we went back through seven years of bank accounts and summed the total recorded receipts. (If you deal in lots of cash the HMRC will look at your lifestyle, assess how much you must be spending to sustain it, and will go from there. If you do deal in cash, and you hide some under a mattress which is later discovered, you will be in even more serious trouble, so I strongly recommend you disabuse yourself of that as a solution).

After agreeing the figures I obtained authority to approach HMRC on the client’s behalf and declared the full extent of the problem. After working with the assigned officer over a number of weeks as numbers were examined and queried we had spoken over the telephone a number of times.

It turned out that the original confusion was caused by a move of domestic residence from one part of the country to another. The bottom line was, one tax office thought the client had moved to a new district and was no longer its responsibility; and the tax office covering the new address had no knowledge of the relocation and the need to manage the file. As the individual had been overseas and out of the UK tax world for over six years, nobody in HMRC noticed anything amiss.

Let’s cut to the chase. After working through the legislation I had calculated that the uncontested tax obligation was £50k, and possibly more. Adding potential liability for back taxes, accrued interest and potential penalties then, if the Revenue accepted the deductions being claimed, the total amount of money HMRC could demand was at least £125,000.

Now, I admit times change. I do not do this work anymore so I cannot speak for the attitude of HMRC today - but when the final negotiation was held to settle this client’s affairs the Revenue officer agreed that he would assess the client’s liability at £50,000 because:

1. HMRC had been approached before they had cause to raise an investigation

2. HMRC was satisfied that by hiring an advisor the client had used best efforts to straighten out his affairs

3. The client had a house with sufficient equity in it to permit an increase in the mortgage by £50k to pay the debt quickly in a lump sum

4. The client had young children of school age and would have visited the parental sins on them had the family been required to move house and change schools

5. And the client had already changed his method of remuneration by paying himself a salary from a limited company from which PAYE was being deducted instead of relying on self-assessment declarations as a sole trader

From memory, the total cost to the client of all the professional advice paid for was in the region of £18,000 and the assignment, from start to finish, was conducted over about six months. But as that collective advice and work saved at least £75k in interest, surcharges and penalties, not to mention the possibility of being accused of tax evasion (a criminal offence) and ending up in the dock somewhere, you will have to consider whether that was value for money or not.

In your correspondence you ask how much accountants cost these days. Depending on your postcode, anything from £50 an hour for junior clerks to £400 or more an hour for senior partners and all figures in between. The harder you yourself work to deliver accurate figures the less work you will be asking them to do and the smaller their bill for the time needed.

So there we are. Finally, you state in your first post that you own your own house. You state that you earn £12k a year from your job. Unless you inherited property or wealth, that can only support a mortgage of, perhaps, £40k? (I’m sure other readers will correct me if I am wrong). If you had saved a deposit of £10k, you might be able to live in a house worth £50k. If you are living somewhere worth two, four, six times as much, HMRC will expect to be told where the money came from to buy it. If it is from your “hobby” income, then they may well take the attitude that you have bought at least a part of your home with their money, and they may want this money back. My strong advice is to be ruthlessly open and transparent when the investigation starts; and try to get ahead of the enquires by offering as much information as you can before it is asked for. This WILL help.

Davy_Jones_II

OP, it seems that you have used the money you saved by tax evasion to buy a house, so I don’t really understand why you would think that you now get to keep it while not paying what you owe.

Hopefully it’ll just mean a mortgage, not selling it, but as above, the first step is to get your books in order ready for the investigation.

If you want to stay out of jail (and jail is on top of o paying, not instead of) then stop with your ideas of hiding things or lying.

csgohan4

Pennywise wrote: »

You don't know if anyone did. HMRC have been publicising their counter tax evasion plans for years. It was well known that they were getting info from Ebay etc as to their sellers, transaction history, etc., and they'll have been doing the same from other platforms too.

Also the HMRC has access to your banking records, so when they see X coming in with no reasonable deductions to the HMRC, alarm bells will be ringing, albeit decades later.

I do wonder whether the OP is genuine though???

[Deleted User]

hoping4calm wrote: »

I know I have messed up but I had a cancer battle a few years ago and worry about the stress of all this on my life and health.

I just cannot believe they would go to such an extent as to ask me to pay so much back or threaten me with jail. Can I ask for any mitigation on health grounds? Would a note from my GP help in any way?

Has anyone here been through this before?

I know two people who have been to prison, one twice, for tax evasion. Both taxi drivers got a couple of years each and not for anything like the figures you are looking at having avoided.

having an illness for a few years does not give grounds for leniency for a 20 year fraud.

DoctorStrange

Also the HMRC has access to your banking records, so when they see X coming in with no reasonable deductions to the HMRC, alarm bells will be ringing, albeit decades later.

Not to derail this thread, but is this true? How can HMRC have unrestricted access to personal and business back accounts?


To the OP;
You've been caught. There's no point being annoyed at this or feeling hard done by. Your best best is to gather as much of your records as you can, organise them as best as possible and work out rough figures for each year. Then take those to an accountant for a free hour's consultation (if possible) and decide whether to defend yourself to reduce your liability as much as possible, or just to settle up with HMRC.

Although it feels like you're being disadvantaged now, you've had the benefits of money you weren't entitled to (lower interest payments on the mortgage, greater quality of life etc) so it's not entirely a one way street - even if you would have done things differently with the benefit of hindsight...