Paying back-dated tax

Kaster_2

I went freelance 4 years ago this March and haven’t paid any tax during that time.

For what it’s worth, I worked for around 20 years always paid tax but have avoided it since going freelance. It’s been a long hard road towards making my freelance business a success, but it’s now doing ok (I’m a sole trader). 

It’s now weighing heavily on my mind about paying tax rather than being found out and facing penalties. What I’m curious about is because of my long history of paying tax, if I suddenly reappear on their radar again will they get curious and want to know more about my income for the past 4 years, rather than me simply declaring my income for the current tax year? 

I don’t earn enough to pay the tax bracket I fall into and a large back-dated sum also, so am concerned about the corner I’ve backed myself into. It is totally a situation of my own making, of course, but I can’t change my previous decisions now and was wondering if anyone with good knowledge on the topic can say whether they are likely to dig deeper or just accept my sole trader registration and tax submission solely for the current period? 

Dazed_and_C0nfused

No one can say for certain.

But it will almost certainly cost you less overall if you come forward and voluntarily complete returns for the tax years in question rather than being found out by HMRC first.

bermudianmark

It won't be 4 years as such as you submit tax returns based on trading periods so for example trading for the year to 30th April 2018 is due to be included on a tax return in Jan 2019 so with a bit of luck you are only two years behind.

Jeremy535897

bermudianmark said:

It won't be 4 years as such as you submit tax returns based on trading periods so for example trading for the year to 30th April 2018 is due to be included on a tax return in Jan 2019 so with a bit of luck you are only two years behind.

Even if OP did not go freelance until 1 May 2017 (which is not what he says), he would still pay tax in 2017/18 based on 11 months of the first year, and then pay tax on the same profits (plus April 2018) in 2018/19. See
https://www.litrg.org.uk/tax-guides/self-employment/working-out-profits-losses-and-capital-allowances/how-do-i-work-out-my

Kaster_2

Thanks for the replies so far.
When it comes to repayment schedules, how flexible are HMRC with these, or is it a case of they set the terms and you have no choice but to adhere?

[Deleted User]

Kaster_2 said:

Thanks for the replies so far.
When it comes to repayment schedules, how flexible are HMRC with these, or is it a case of they set the terms and you have no choice but to adhere?

You will already be subject to penalties and interest charges due both to lateness of filing and non-disclosure. Some penalties can be mitigated but you need to ask if you are best placed to negotiate with HMRC in the same way that an accountant or tax advisor could. It is the case that your submissions may be subject to more scrutiny as a result of the non-disclosure. I would strongly suggest that you seek professional advice to at least remove some of the stress of your situation.

dctrgre

purdyoaten2 said:

Kaster_2 said:

Thanks for the replies so far.
When it comes to repayment schedules, how flexible are HMRC with these, or is it a case of they set the terms and you have no choice but to adhere?

You will already be subject to penalties and interest charges due both to lateness of filing and non-disclosure. Some penalties can be mitigated but you need to ask if you are best placed to negotiate with HMRC in the same way that an accountant or tax advisor could. It is the case that your submissions may be subject to more scrutiny as a result of the non-disclosure. I would strongly suggest that you seek professional advice to at least remove some of the stress of your situation.

Agreed. A competent adviser will almost certainly save you money overall (depending on the amounts involved, I suppose!), as well as reducing stress.

An accountant / tax adviser who specialises in tax investigations would be my first call.

Dazed_and_C0nfused

Just to be clear you cannot be penalised for not filing a return you haven't been issued with.

You will get 3 months to file the returns on e they are issued but the tax would still have been payable on the normal due dates so interest will be charged on may late payment.

And potentially a penalty for late notification but by coming forward voluntarily you can mitigate that.

oldbikebloke

lets just be clear on your position
- for "4 years" you have been self employed 
- you have not registered that fact with HMRC. You were required to do so by 5th October in the year after the end of the tax year in which you started self employment. That is however largely academic as in practice HMRC does not impose a penalty for late registration (although theoretically one still exists for being late)
and, the key issue....
- in each of those 4 years your taxable income was above your personal allowance, so a tax liability exists, but has not been declared???? If there was no tax liability then you have done nothing wrong, if there was... read on:

there is no way anyone on here can say with certainty what attitude HMRC will take re undeclared taxes as it is a case by case basis .
However, as they have made clear many times, they get a lot harder in their stance if they "discover" you, rather than you voluntarily coming forward to sort it out before they find you so filling in your gap would be very wise.. 

Kaster_2

Thanks again. Obviously, I could get lucky and they don’t do any back checking at all, but I understand there is likely a very slim chance of that happening.

When it comes to repaying these fines/interest/outstanding tax, do they set the repayment schedule or can they be flexible? 

Also, if talking to a tax advisor would I need to have my numbers in full order first?

[Deleted User]

Kaster_2 said:

Thanks again. Obviously, I could get lucky and they don’t do any back checking at all, but I understand there is likely a very slim chance of that happening.

When it comes to repaying these fines/interest/outstanding tax, do they set the repayment schedule or can they be flexible? 

Also, if talking to a tax advisor would I need to have my numbers in full order first?

Let’s get on the road to determining the liability first - it may not be as much as you think and the engagement of an advisor can assist greatly with that. Obviously, the more information you have, the less time it will take to prepare your accounts but, even if the only records in your possession are bank statements, get the ball rolling. You will feel better for it.