many years unpaid tax

holder

i have been working as a self employed builder for 15 years, i volunteraly VAT registered and have completed my VAT on time and i have done this without an accountant for 15 years.(all with no problems)

but when i first started back in 93 i never contacted the tax office to let them know i was self employed!!!!!!! the longer it went on the harder it got to come clean?

i have now decided i can no longer live with the cloud hanging over me so how is the best way to approch the hmrc to inform them of what has happened, and what is best to say to why i have not come clean?

here is a guide to what i have earned and what i have spent out including capital assets at 40% first year and 25%pa after

2007 22163.07
2006 21404.43
2005 21288.14
2004 24764.65
2003 4270
2002 23775.5
2001 21763
2000 16573.78
1999 16076.09
1998 4148.72
1997 3640.3
1996 8297.7
1995 13136.82
1994 6111.5
1993 12170.8

above is my earnings and below is my spending inc capital assets

1993/946317.79
1994/957219.76
1995/967072.58
1996/978965.26
1997/986155.19
1998/998687.4
1999/0010617.75
2000/0111336.75
2001/0211200.05
2002/0313551.45
2003/0410555.81
2004/0515796.54
2005/0613905.8
2006/0717095.45


all the above is less of VAT which im not sure is included in tax returns?

im sure your all going to say get proffesional help and quick but i have spent a month doing as much as possible as regards logging all reciepts and expenses etc

i also know the what the tax free allowence for each year is.

just a few comments on how i need to get my books together as good as i possibly can before i go to anyone.

what boxes have to be filled in on a SA form?

the one thing that has my mind split is do you put your earnings with or without VAT and the same then on any expenses?

Thanks for looking

fengirl_2

You are a brave man!
You can make your accounts up with or without VAT as long as you are consistant.
However, your spending includes capital assets which cannot be included in your accounts - you would need to claim capital allowances on these.
It sounds as if you have good records - I would just make sure they are all filed in appropriate years and match up to your spreadsheets. You will have to produce accounts before you can fill in your SA - HMRC will guide you to how to do this. However, you have income to declare outside the 6 year limit, so I would guess HMRC will just want accounts for the earlier years to start with.
It's not just a question of writing in and sending the SA's - be prepared for HMRC to go through your affairs with a fine tooth comb. They will want to see all your bank and building society accounts, other investments and will also want capital statements. They are not going to just accept your figures and say 'thanks, holder, just give us the tax and off you go'. If you think you can cope with all that on your own, then do so, but an accountant will lighten the load and be able to negotiate a fair settlement.
I expect you realise that potentially your fine could be 100% of the tax due (although of course there is mitigation), plus interest.
If you are going to do this yourself, start with a letter owning up to the past years and enclosing a cheque for a reasonable sum to cover what tax you think might be due. This will show good faith on your part and help to stop interest running.

holder

Thnaks Fengirl

would i be correct in thinking that the more i help with any investigation and co-operate than that would bring the % of the fine down?? also by admiting this unpaid tax before i am found out will go in my favour??

one more question? i have every month of every year on pc and on paper but as you said my capital allowance should be on seperate paperwork yes? and not included in my input tax?

so any earnings are classed as output tax?
any business spending is input tax?
any plant or machinery that will last longer than a year is classed as capital allowence?

thanks Agiain.

fengirl_2

Yes, the fact that you have 'fessed up to this and co-operate will mitigate the penalty.
Your takings, or work done should be added up and shown as turnover.
All expenditure, apart from capital should be shown as expenditure. This should be analysed into materials, travel, postage and stationery, etc. The total expenditure is deducted from the total takings to give the profit.
Any items with more than a year's worth of life in them would be capital, but I would count small tools which cost under £100 as revenue and include them with other expenditure.
Capital allowances are then calculated annually on cars, vans and equipment - too complicated to easily go into here.
Your profits according to your figures below don't look huge and HMRC will want to know how you have maintained yourself during this time - hope there is a wealthy women behind you!

System

What I'm astonished at is the fact that you have been filing VAT returns for years yet HMRC have never queried why you didn't submit Income tax returns.:eek:

Elaine_Wilson

Just a bit if information on the penalties. As Fengirl has said there is a maximum penalty of 100% of the unpaid tax (and national insurance contributions).

This is then reduced according to the circumstances surrounding the case.

Normally you can get an abatement of 20% for full disclosure but this may be increased to 30% if the circumstances are such that you are not on the Revenus's radar at the time of disclosure.

The penalty can be reduced by up to 40% if you co-operate fully with the subsequent investigation. So make sure letters are answered promptly.

The final part of the mitigation is usually referred to as "size and gravity". The size refers to the amount of tax unpaid and admittedly does not seem to be too grweat in your case. The other aspect is, to put it crudely, how financially "savvy" you would be expected to be. Perversely, it might help if you came across as a bit "thick" in relation to your financial affairs.

I think you should be looking at a relatively low level of penalty, maybe 10% of the tax or even less.

Yorkshire-Lady_3

One major factor which hasn't been mentioned so far. You'll be asked if you've received any benefits during this time. Answer this honestly, as they will investigate and check, and if you have, then you'll not be looked on as favourably.

johnllew

fengirl wrote: »

I expect you realise that potentially your fine could be 100% of the tax due (although of course there is mitigation), plus interest.

Or a prison term.

mrs_deadline

But still, no reason why it should come to that if someone is coming clean and showing every intention of paying what's due. Good luck, holder. You can download SA forms here, to check the different categories of income and expenses used:

http://www.hmrc.gov.uk/sa/forms/content.htm

Monkeeboy

Its all good advice. particularly the one about benefits. Have you made a tax credit claim giving details of earnings - if so was this false? If it was then you will also need to repay any amounts overclaimed.

No matter when you own up its always going to be difficult but the best thing is to do it sooner rather than later as it may well be that the tax office is already looking at you but hasnt yet been in touch. If they contact you then you will be looking at a bigger penalty.

Liquorice_Twirls

Well done you for having the courage to face up to this.

I hope you will feel much lighter after your taxes are straightened up.

PS Well I guess your wallet will be much lighter, but I'm hoping the burden on your shoulders will be lighter too!!