many years unpaid tax

fengirl_2

Johnllew - I have seen taxpayers evading far more tax than this questioner and prosecution not even being an option - no need to scare the poor chap!
High profile people who have been imprisoned in the past were arrogant and thought they were above the law, not people who have come forward voluntarily and coperated.

moneypooh

Are you a member of the FSB (Federation of Small Businesses)?? If not get yourself signed up asap. The fees are not expensive (about £100 per year for a partnership - not sure for sole trader). They have a free legal advice team on hand 24/7 that will help you thorugh the early stages of ANY business problem including tax, VAT etc...
They also have a wealth of discounts for self-employed/businesses people (insurance, banking etc..)

Good luck I hope things have a goog outcome for you

holder

Thanks everyone for trying to understand the possition im in!!!

i have never claimed 1 penny from the gov regarding any benifts etc.

and all i want to do is get my books as good as i possibly can before i take the plunge.

Cheers Holder

Yorkshire-Lady_3

Holder, I've replied but am logging off now.
You know where I am if you need me.

Sally

jiggy2

just one thing to add to the above...normally builders tend to do cash jobs (not saying you have done any)...so one thing the HMRC could do is try and estimate how much you would need each year to survive e.g. rent/mortgage, utilities, food, travel, clothing, entertainment etc.

It might be helpful for you to just list down your expenses and what you think you would need to survive. Then also compare it to the profits you are showing for each year. As a rough guide this will tell you whether you would have been able to survive based on the business....if not enough profits then where did the rest of the funds come from - gifts, parents/friends, etc.

this will help you also when you go to an accountant.

johnllew

fengirl wrote: »

Johnllew - I have seen taxpayers evading far more tax than this questioner and prosecution not even being an option - no need to scare the poor chap!
High profile people who have been imprisoned in the past were arrogant and thought they were above the law, not people who have come forward voluntarily and coperated.

Uh, have you added up the figures? If I'm correct, total earnings for the 15 years were £219k and total expenses £148k, giving net profits of £71k or under £5k a year. Could anyone live on that? The building trade is notorious for evasion and the Revenue will be loking for missing cash especially on those kind of figures.

Will you give him an assurance that a prison term is not an option?

Murdina

if it is a straightforward failure to notify and the figures he produces now are as reasonable as possible after all this time, then I agree with fengirl it is not the sort of case HMRC would typically prosecute. Though they are tightening up. They tend to look for elements of serious fraud or cheat when prosecuting e.g. if you have been under enquiry once, agree a settlement and then it turns out you have lied.
A more interesting question though would be how is he going to pay the back taxes? You are normally expected to enter into a contract settlement paying tax, interest and penalties at one go.
Getting a specialist firm of accountants if can possibly afford it is the best route.

fengirl_2

Johnllew, I think a prison term is highly unlikely. We don't know holder's personal circumstances - he may have a rich widow to keep him! That was why my original reply told him to be prepared to produce capital statements.
In 26 yrs as HMIT, I only ever saw one person imprisoned and that was L.Piggott (who was investigated in my office). Other taxpayers I have dealt with (in the same game) concealed far greater earnings, off shore accounts, etc etc and never came anywhere near being imprisoned. Co-operation is all in dealings with HMRC.

Ted_Bloke

fengirl wrote: »

In 26 yrs as HMIT, I only ever saw one person imprisoned and that was L.Piggott (who was investigated in my office). Other taxpayers I have dealt with (in the same game) concealed far greater earnings, off shore accounts, etc etc and never came anywhere near being imprisoned. Co-operation is all in dealings with HMRC.

Worked in HMIT eh? Northampton eh? :think: wonder if she remembers me?
Valuable and reassuring advice for everyone.

meester

johnllew wrote: »

Uh, have you added up the figures? If I'm correct, total earnings for the 15 years were £219k and total expenses £148k, giving net profits of £71k or under £5k a year. Could anyone live on that? The building trade is notorious for evasion and the Revenue will be loking for missing cash especially on those kind of figures.

Will you give him an assurance that a prison term is not an option?

I don't think prison is remotely on the cards if he is honest, given that it is him owning up, rather than being caught. But the honesty is certainly something they would question on the face of the OP's figures - if I was an HMRC tax inspector, I would not believe his figures at all.

The questions they would ask are:

1. What is the cost of your lifestyle? Do you live alone, are you married, do you have a family to support? Do you own a home, what is its value, what are your mortgage payments, how well is it furnished? Do you have any significant financial commitments - car payments (or expensive car owned outright), etc.

2. They would also want to see bank statements, obviously as a builder you're asking for cash-in-hand, especially with the somewhat bizarre decision to register for VAT, which only increases costs to the client - there is massive incentive to work cash in hand. In 1990 VAT threshold was £25,400, raised to £35,000 in 1991. In 1993 it was raised again to £45,000 You have never come close to this threshold. The VAT registration to me would appear as a scam to hide a small fraction of your income in VAT invoices while doing most work off the books, and facilitating reclaiming of input VAT on your expenses. I am not a builder, but your costs seem very high in relation to your profit. Labour costs in the UK always far dwarf the cost of materials, that is why companies move operations off-shore. That yours do not is inherently suspicious.

In looking at bank statements they are going to want to see evidence of spending to fund your lifestyle. That would be payments to supermarkets for food, petrol, etc. A lack of a consistent and substantial trail of evidence to support even a subsistence lifestyle: in the first two years of trading you claim to only have made £4,744.75 in cash (£2,372/year) would be enough for them to get you not only on tax non-payment, but on VAT fraud as well. Penalties would be steep. You say you have received no benefits, but your income of £5k/year does not really cover a small private rent (even in the wilds of Scotland, most of that would be eaten up to rent a small flat) and basic food and subsistence, let alone any kind of decent existence. Assuming you had a house or savings already, which is the only way I can see to survive on this money, they would still expect to see your money being spent each month. If you did not see either payments to supermarkets and so on, or cash being withdrawn to pay for these, that would be solid evidence for cash-in-hand work, and deliberate misrepresentation of your income.


I don't see a problem with you fessing up, but you better be ready to answer the questions about how you managed to trade for 15 years without ever making a living and why you bothered, why your costs are so high in relation to income, how you supported yourself, because your declared income is blatantly insufficient. They will come round, and they will check you out, and at the moment your story isn't adding up. They will also want to know whether you are committing VAT fraud by reclaiming money on purchases, but not declaring all of your sales, and why you chose to register, because your motives look questionable (you don't say, but if you are dealing mostly with private clients, VAT registration increases your prices by 17.5% and makes you look less competitive, which isn't worth the saving you make on inputs; if you have some business clients, then VAT would generally be reclaimable and wouldn't hurt your business, but still there would appear to at least a mixture of on- and off-books work due to your low income relative to costs). I personally as an inspector would suspect VAT fraud, as you knew you had a liability to taxation, as you registered for VAT, but chose not to pay taxes for 15 years, which would create a prima facie assumption that your motivation in VAT registration was tax avoidance on inputs and underdeclaration on outputs. You have not been honest for 15 years, they are unlikely to assume honesty now.

So, the question is, do you have an answer to these questions, because you had better have.