HMRC Sent me a Letter re Unregistered Business

badmemory

zagubov wrote: »

It's half-term holiday in many areas right now.

I sort of hope you are right. Otherwise this situation is (as it should be) rather bad. Hopefully someone has been reading about Al Capone

Davy_Jones_II

hoping4calm wrote: »

I'm going to bite the bullet and work out what I think I owe and hope they accept it.

My house is worth about 300K so they will know I have equity in this. Hopefully I won't lose this.

I know people here are judging me harshly but I truly never realized the extent of things and how serious this is taken by HMRC.

Thanks for the reality check and although hard to hear, it's made me realize I need to be honest with them in hopes they won't punish me too much. I read that you get mitigation for being honest - fingers crossed!

No-one seems to be judging you at all, they are just trying to get you to understand the seriousness of your position.

If you don’t have huge savings, how do you imagine you are going to pay off the six figure sum that you’ll be assessed as owing?

You need a proper plan here to reconstitute as much information as possible. Are you selling a product or a service, and how are people buying from you? If online you’ll have records of customer names, dates, times and amounts, so start there.

justjohn

hoping4calm wrote: »

I'm going to bite the bullet and work out what I think I owe and hope they accept it.

My house is worth about 300K so they will know I have equity in this. Hopefully I won't lose this.

I know people here are judging me harshly but I truly never realized the extent of things and how serious this is taken by HMRC.

Thanks for the reality check and although hard to hear, it's made me realize I need to be honest with them in hopes they won't punish me too much. I read that you get mitigation for being honest - fingers crossed!

Get an Accountant. You need one that will do all the work with HMRC. eg answer question supply facts and figures.


Do not deal directly with HMRC. Let the accountant deal with them.

An accountant will cost 1-2k for each year you are getting investigated for.(they will prob save you that in tax anyway)


it is normal practice for HMRC to deal with accountants. HMRC may at some point want to interview you.


From what you have said you have next to no overheads , so you will be at the very least be looking at a tax bil.


Your accountant will limit your tax liability helping to avoid HMRC's wrath lol


HMRC will look at the first year. Then decide from there how or if they will handle previous years.


Your accountant will only give HMRC the info they request or the info they need. It is upto HMRC to do the leg work. The accountant works for you not HMRC.


Yes people do get through it, Some do go to jail . Many do not even have a tax bill to pay in the end.


Good chance at this point HMRC are on a fishing trip.

DoctorStrange

An accountant will cost 1-2k for each year you are getting investigated for.(they will prob save you that in tax anyway)

He's being investigated for 30 years, so that's £30-£60k by your sums. He's admitted he has no expenses and that is only in the last few years earnings have got up to the £30k mark. I'm not sure the costs/benefits stack up here.

I think I'd be more inclined to let HMRC lead the way here and play as dumb as possible. If the OP can at least produce the right income amounts for each year then I think there'd be little difference between HMRCs tax amounts and the expensive accountants - and he might avoid the harsher penalties and interest by showing genuine remorse and willingness to correct things, rather than any perception of aggressive accounting practices?

Just a thought ...

tebthereb

OP, please please please get professional advice and stop posting on here and trying to take rectification action such as deleting online accounts.

This is a public forum. Some of the stuff you are saying here could potentially be linked to you by HMRC and are not helpful to your cause. There is also a lot of scaremongering and nonsense replies on here.

If you are not careful you are really exposing yourself to some unwanted repercussions. Some of the comments you have made here, if relayed to HMRC in the wrong way, is going to lead to a world of correspondence and pain from them.

Yes there will be a cost to an advisor but it will be less than rolling over to HMRC who may well seek penalties and to go back many years.

Trying to cover / delete stuff puts you into a higher category of possible penalty and consequences so please please stop and just get proper help. Happy to by contacted by PM if you need a referral.

soolin

Many years ago (and I mean many) I worked as a tax consultant and we routinely had clients approach us having been found out by HMRC. The usual way we dealt with it, and at the time it was fairly standard regardless of which firm you used, was to schedule a series of meetings with the client and talk through your average week or month, just get you talking to see if we could pick out exactly how you worked- hours spent for instance, services used- likely expenses. From that we could start to build a picture of your likely income and associated expenses - we would also expect full disclosure of bank accounts with the understanding these would be provided to HMRC on request. At that point any client who we thought was witholding information or financial information with us we would politely suggest went elsewhere, as we would not help someone commit fraud.

If we could work out a 'shape' of a likely business we would prepare accounts and offer them to HMRC, sometimes we needed negotiation or explanation and would be open about what actual receipts we had- but would only supply evidence if HMRC disputed the figures and refused to negotiate within a likely range.

Once we had accounts for a couple of years we would then roll them backwards using various projections, and again offer these to HMRC at each stage of the game.

Most of the time with an open and honest client we could negotiate a likely tax bill (and NI) for each year, however it was HMRC who set the level of penalties and fines and whilst we could appeal it wasn't something we could overly influence.

We usually stopped at around the 6 year back mark and waited for HMRC to decide whether to go back further on the basis of fraud.

This service was not cheap, but we did the negotiation with HMRC and we rarely had to pass it up to senior management to go to court even though we did have some well known figures. At all times we acted with the understanding that the figures were as accurate as we could make them based on the limited information to hand, no accountant valuing their reputation would be party to fraud. If at any time we believed the client to be actively fraudulent or trying to deceive us we would notify HMRC that we were withdrawing from acting on behalf of that client.

Many clients only came to us having tried to deal with it themselves and being faced with a 'set' figure of accounts from HMRC based on a higher than normal figure for that business - HMRC suggested a likely taxable figure and client would have to dispute this, which is harder than starting off with a likely set of accounts and negotiating with HMRC. There is also a time element, once HMRC discover an unregistered business they start adding penalties and fines to the bill immediately, and it becomes harder and harder to negotiate a more likely taxable figure if client delayed.

As I said though I am out of date now and I understand that there are now specialist accountants who work forensically to prepare likely accounts.

laticsforlife

Look, you have come here for advice, and most of what I've read is OK.

You haven't notified HMRC when you should have. This means that they CAN and WILL go back as far as is needed, up to 20 years. It only needs to be shown that you were negligent in not telling HMRC that you were liable to be on Self-Assessment.


Next how much is your exposure - I would in the first instance write back and say as much as you can, and as much as you know. Say when you started, and say what records you have (i.e. none). also go to your bank now and ask for the last 6 years statements, HMRC will legally ask you to get them anyway, you might as well show co-operation, as it will only help in the long run. To not do so could run the risk of penalties for failing to provide something that is clearly in your power to provide.

What will also happen is that as soon as the Officer working the enquiry realises that it was correct and you have been failing to declare (and also because you are in PAYE there is a good argument to suggest you should know the basics of tax and that you should have notified), they will submit it for tax evasion and someone will review whether you should be prosecuted or not.

Therefore my advice is do one of 2 things before this happens;
1. Go to a tax investigation specialist (NOT necessarily an accountant per se) to take the initiative. It WILL cost into 5 figures by the end of it but will probably pay for itself, their advice could be invaluable and they will be used to negotiating with HMRC - look for someone who can show you they have dealt in COP9 work (ask them that specifically, and if they know what it is, then that's a good start!)

2. Look to making a 'voluntary' disclosure (either yourself or in conjunction with 1. above), using the Contractual Disclosure Facility - see HMRC's website under the heading "Ask HMRC for a Contractual Disclosure Facility arrangement (Form CDF1)" . I say 'voluntary' as of course they already know about you so in reality it's hardly voluntary, and is clearly because you were found out, but actually it doesn't stop you from entering that facility. The benefit to you would be a specialist from the Fraud Investigation part of HMRC would take over, but so long as you are forthcoming and provide everything (or allow HMRC to get it on your behalf), then you will gain immunity from prosecution, and will get the penalties as low as is possible.

In your situation I would suggest the penalties will be in the range 45% - 70%, and if you are fully co-operative, you are more likely to be somewhere towards the bottom of this range, so lets say 50% for a ball-park figure. This is for deliberate but not concealed errors (the fact you didn't declare doesn't = concealment, that would be if you set up an account in Switzerland and named it after your dog, sending the money there to hide it ....oh hang on that worked didn't it :eek:

You need to start thinking if there are any expenses to set off against the cash you received (and banked in the main so you said) - so if you have a room set up, the costs of that, plus a share of the utilities could be argued, or at worst 10% of the income as a flat rate might be something they'd accept.

You might want to start thinking of how you can draw some equity from your house, but I'd also suggest NOT saying to the lender that it's to pay a tax bill, as they won't lend it you from the mortgage

Good luck, but do the right things now and it won't ever be as bad as some of the scare stories on here.
Good luck,

DE_612183

You should also make the current business activities legal NOW.

Set up a limited company or register this additional income for the last Self-Assessment - putting things right going forward will give you an idea of what you should have been paying all along.

What do you do with payments that come in from customers?

laticsforlife

Dave46049 wrote: »

You should also make the current business activities legal NOW.

Set up a limited company or register this additional income for the last Self-Assessment - putting things right going forward will give you an idea of what you should have been paying all along.

Going Ltd might just be making it even more complicated for the OP - they seem to have a fairly simple business and just need to;

a) keep proper records of income and expenditure
b) fill in tax returns (register now if HMRC haven't already done so for them)
c) save some money to pay future tax bills
d) set up a new Facebook page!

But yes, your sage advice was something I'd forgotten, instead concentrating on the back period.

brianposter

Just remember that HMRC would normally much prefer having you continuing your hobby and paying tax, than having you sitting in a jail and costing us all money.