Self Employed - Problems

Alicanteboy

I was chatting to a friend of mine the other day, she is 63 and works as a self employed consultant for a small company, she has been working there since November 2018.
I am also self employed and we got on to the subject of paying tax and national insurance on time to HRMC. 
Then she dropped a bombshell, she told me that she has never bothered to tell HRMC about her being self employed, as the amount of money she earns, she does not think she would have to pay anything! I explained to her that whatever amount she is earning she still has to tell them.
Does anyone know what will happen to her when she does tell them, ie fines etc, so I can gently break the bad news to her.

[Deleted User]

Whilst I've no faith myself in HMRC. 

Perhaps show them this link
https://www.gov.uk/undeclared-income

"If you contact HMRC first, they may consider your case more favourably."

Sandtree

Telling is less costly than being caught. 

Generally they'll be asked to do the returns for the missing years, the amount due is calculated and interest added for the late payment plus a fine for late registration/payment.  The fines have some negotiability (hence better to admit than be caught) but they can be substantial 

Alicanteboy

Thanks Deleted User I will pass that link onto her. This is my first post, so may I share a joke with you and anyone else reading this, well I thought it was funny: "Why did the mushroom have so many girlfriends?" - Because he was a fungi to be with!  

Dazed_and_C0nfused

Strictly I don't think she does have to tell them if there is no tax or NIC to pay however I suspect that that isn't the case here.

She cannot be fined for non completion of Self Assessment returns as she hasn't been sent any to complete.  Once they are issued she has 3 months to get them completed and returned to HMRC.

If she does owe tax or NIC then she will be charged interest from the standard dates applicable for the tax years in question.

There may be penalties relating to the amount of tax owed but at the moment we don't know if she even owes anything.

As others have said making contact with HMRC is likely to be the best option for mitigating any penalties.

68ComebackSpecial

If she hasn't got sufficient years of National Insurance contributions then she won't be receiving a full State pension in a few years time - something she should definitely be made aware of.

Marcon

Alicanteboy said:

I was chatting to a friend of mine the other day, she is 63 and works as a self employed consultant for a small company, she has been working there since November 2018.
I am also self employed and we got on to the subject of paying tax and national insurance on time to HRMC. 
Then she dropped a bombshell, she told me that she has never bothered to tell HRMC about her being self employed, as the amount of money she earns, she does not think she would have to pay anything! I explained to her that whatever amount she is earning she still has to tell them.
Does anyone know what will happen to her when she does tell them, ie fines etc, so I can gently break the bad news to her.

Depends how much she earns. The days when you had to register as self employed and declare any self-employed income, however little, have gone - they went from 6 April 2017, to be precise. See https://taxaid.org.uk/guides/information/a-starting-point-for-the-self-employed/self-employed/trading-allowance for an excellent explanation.

Sandtree

Dazed_and_C0nfused said:

Strictly I don't think she does have to tell them if there is no tax or NIC to pay however I suspect that that isn't the case here.

She cannot be fined for non completion of Self Assessment returns as she hasn't been sent any to complete.  Once they are issued she has 3 months to get them completed and returned to HMRC.

If she does owe tax or NIC then she will be charged interest from the standard dates applicable for the tax years in question.

There may be penalties relating to the amount of tax owed but at the moment we don't know if she even owes anything.

As others have said making contact with HMRC is likely to be the best option for mitigating any penalties.

I believe  she has to do a self assessment as a self employed person if she is generating more than £1,000 of revenue (not profit) in any tax year.

Dazed_and_C0nfused

Sandtree said:

Dazed_and_C0nfused said:

Strictly I don't think she does have to tell them if there is no tax or NIC to pay however I suspect that that isn't the case here.

She cannot be fined for non completion of Self Assessment returns as she hasn't been sent any to complete.  Once they are issued she has 3 months to get them completed and returned to HMRC.

If she does owe tax or NIC then she will be charged interest from the standard dates applicable for the tax years in question.

There may be penalties relating to the amount of tax owed but at the moment we don't know if she even owes anything.

As others have said making contact with HMRC is likely to be the best option for mitigating any penalties.

I believe  she has to do a self assessment as a self employed person if she is generating more than £1,000 of revenue (not profit) in any tax year.

HMRC might like you to complete a return if you are self employed and if a return, or notice to file a return, has been issued then one needs to be filed.

But if no tax or NI is due (on the individuals total taxable income for the year) then as far as I'm aware there is no legal requirement to register with HMRC.

Sandtree

Dazed_and_C0nfused said:

Sandtree said:

Dazed_and_C0nfused said:

Strictly I don't think she does have to tell them if there is no tax or NIC to pay however I suspect that that isn't the case here.

She cannot be fined for non completion of Self Assessment returns as she hasn't been sent any to complete.  Once they are issued she has 3 months to get them completed and returned to HMRC.

If she does owe tax or NIC then she will be charged interest from the standard dates applicable for the tax years in question.

There may be penalties relating to the amount of tax owed but at the moment we don't know if she even owes anything.

As others have said making contact with HMRC is likely to be the best option for mitigating any penalties.

I believe  she has to do a self assessment as a self employed person if she is generating more than £1,000 of revenue (not profit) in any tax year.

HMRC might like you to complete a return if you are self employed and if a return, or notice to file a return, has been issued then one needs to be filed.

But if no tax or NI is due (on the individuals total taxable income for the year) then as far as I'm aware there is no legal requirement to register with HMRC.

According to the government ( https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return )

You "must" send one if you are self employed earning £1,000 of revenue. The language suggests its a requirement rather than it saying "should" meaning there is some flexibility. That said we've all seen the current government be very lax with its use of language in comms in relation to Covid and I certainly cannot point to the underlying law that backs the website.

Dazed_and_C0nfused

This refers to chargeability to Income Tax or Capital Gains (not sure why not NI as these have lower thresholds?)

https://www.gov.uk/hmrc-internal-manuals/self-assessment-legal-framework/salf210