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TaxRobin
TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 13344
Experience:  International tax
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From the mid 90s until 5years ago I was addicted to finding

Customer Question

From the mid 90s until 5years ago I was addicted to finding a way to escape my job. I signed for multi level marketing, network marketing, all sorts of scams and even had a go at selling herbalife products. When I retired this all stopped because I had wasted so much money. My losses were probably 100 times the income, BEFORE normal expenses. In retirement I started to occasionally help a few family friends and acquantances with gardening and decorating. I did not intend that they should pay me but they insisted that I get some beer money and something towards the cost of equipment ect. I must have mlade nearly 1000 pounds before I even thought of tax and self employment. So I refused further payments about 3years ago.
The point is that I never thought to inform hmrc until I made a bit and then I panicked and hid my head in the sand. Am I in trouble with hmrc and if so what should I do. I already do a self assessment because of foreign earnings on dividends.
Thankyou
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
You could be in serious trouble with HMRC and they might impose penalties for failure to declare. You are required to declare any income which has been received without deduction of tax. However, their advice is:
'Working out if you should be paying tax
To work out if you are a taxpayer follow these 3 steps (these are covered in more detail below):
Add up all your taxable income
Work out your tax-free allowances
Take your tax-free allowances away from your taxable income
If your taxable income is more than your tax-free allowances, you'll have to pay tax and must contact HMRC if you're not already paying tax.
If your tax-free allowances are the same as or more than your taxable income, no action is necessary. If you think that you shouldn't be paying tax but are, you'll be able to claim a refund.'
So some time with the wet towel round the head and the backs of many envelopes is needed to determine the exact position year by year. All is not lost as your self employment on multi-marketing, upon which you made a loss can be offset against employment income so you might be out of the wood. Indeed you could be due a of tax overpaid.
As regards ***** ***** retirement odd job caper you will have to proceed as above. You might still be below the income/allowance level and be in the clear. HMRC quite correctly look askance as 'cash in hand' employments, a classic tax evasion activity.
You may have to throe yourself on the mercy of the tax man, unless, of course, you are not taxable. Don't bank on HMRC being kind, they are in the business of tax gathering and hold all 'hooks, crooks and comic singers,' to quote my late father-in-law, in equal contempt! You also have a further problem, never registering for self employment.
Sorry to have to be so negative but you could be in more than a spot of bother.
Customer: replied 2 years ago.

Thank you Keith

Firstly, I am paying tax on my pension, so allowances won't help. I did not cash a cheque from hmrc when they messed up when I retired, so maybe they will allow this 300 pounds in my favour.

I think I can remember which online activities brought in the odd payment but not when. Most of my losses were through failed ads or buying into online activities that were not followed up. If all the income from all the capers including receipts for gardening were added up, they would total less than 3000 pounds over maybe ten years without deducting costs/expenses. By outcome I know that I was a real loser. I stopped all activities maybe 4 years ago and regret ever starting.

I know that the self employment bit is a valid point but I did not know that this was necessary until I made profits. No excuse I know.

I want to sleep again, so what should I do, and what penalties would you envisage.

Thank you

Expert:  bigduckontax replied 2 years ago.
Here is the penalty table if HMRC throw the book at you;
'Penalties for missing the tax return deadline
Length of delay
Penalty you will have to pay
1 day late = A penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.
3 months late - £10 for each following day - up to a 90 day maximum of £900. This is as well as the fixed penalty above.
6 months late - £300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above.
12 months late - £300 or 5% of the tax due, whichever is the higher.
In serious cases you may be asked to pay up to 100% of the tax due instead. In some cases the penalties can be even higher than this.
These are as well as the penalties above.'
You are in a 'Gulp' situation and these days HMRC are very keen on the imposition of penalties. You will simply have to come clean, a ghastly prospect, sorry.
Customer: replied 2 years ago.

Ok Keith all gloom and doom, but surely they cannot get too harsh on possibly 2000 pounds before costs and expenses over maybe ten years.

I understand you suggest voluntary admission to hmrc, but surely waiting for them to contact me, or not as the case maybe, would result in the same course of action, and time to sort it.

Have I been careless? Yes. Have I been negligent? Yes. Have I been naive? Yes. Have I deliberately tried to evade and cover up tax fraud? No.

Surely I would also do better briefing an expert, perhaps an ex hmrc inspector to deal with hmrc on my behalf.

I also asked please Keith, what the total max penalties will be. Ball park figures will do.

Expert:  bigduckontax replied 2 years ago.
Say 15 x 300 plus any tax due plus interest, could be as high as 5K.
I would certainly tend to put the whole matter in the hands of a local, trusted agent.
Customer: replied 2 years ago.

Keith

What difference will it make if I wait for hmrc to catch up with me? Why would they decide to look back all those years ago?

Expert:  bigduckontax replied 2 years ago.
You bet they would, they don't like unpaid tax and can and will go back years if they suspect prolonged failure to declare.
Please be so kind as to rate me before you leave th Just Answer site.
Customer: replied 2 years ago.

I would happily pay hmrc this amount to close the case, but I didn't keep any records. Would they accept estimates?

Expert:  bigduckontax replied 2 years ago.
They might; it is a matter to be negotiated with the tax office concerned.
Please don't forget to rate me.
Customer: replied 2 years ago.

Keith

The tax office concerned? Are you suggesting using the local tax office or hmrc headquarters?

Also please, how else can I or they establish any details?

Thank you

Expert:  bigduckontax replied 2 years ago.

The tax office to which you make your tax returns. It will be the one who issues you with your tax coding. Give them your tax reference;

it will be on correspondence, notices of codings etc sent to you by your tax office.

Customer: replied 2 years ago.

Sorry Keith still more: ok I contact them, tell them what I've done, offer them 5k to settle penalties and give them some idea of earnings before expenses?

Expert:  bigduckontax replied 2 years ago.

Yes, effectively making a declaration. Of course they are quite likely to ask you to undertake formal assessment or amend one which has already been submitted.

Customer: replied 2 years ago.

What would a declaration contain? What is involved in a formal assessment?

Expert:  bigduckontax replied 2 years ago.
A declaration, an income tax return, gives details of the full income of the taxpayer and the tax paid to date also.
On receipt of the declaration HMRC will issue an assessment of the tax and NI due, if any.
Customer: replied 2 years ago.

Clearly my pension is paid through Paye and my income from dividends is taxed at source or declared through self assessment if untaxed foreign income.

So, the declaration would simply be a statement to say that during years .........I received approx....... income from say herbalife, and that my expenses/costs mean that I owe ......... or do not owe tax on a profit of.....Also admitting to have failed to apply for self employment or register a new biz, accepting penalties likely to apply and then offering say 5k to close?

Expert:  bigduckontax replied 2 years ago.
I cannot possibly comment upon what effect such an offer might have on HMRC. They may of course accept the position to close their books on the matter.
Customer: replied 2 years ago.

Surely as an expert you can advise me on what to do for the best? Clearly, if this would simply anger hmrc and incline them to be as nasty as possible, if it's not the way to go you should be able to tell me. If hmrc want to trawl through 10 years of mixed up personal bank accounts it would take forever to get anywhere near accuracy. I am quite happy to exaggerate income, ignore costs pay the tax and the fines. I just want it sorted asap

Expert:  bigduckontax replied 2 years ago.
Then come clean with HMRC and be ready to provide details of income not declared, ie that over your PAYE emoluments.
Customer: replied 2 years ago.

Come clean is what I stated 2 emails ago, as I said, based on best guesses. Is this the way to go?

Expert:  bigduckontax replied 2 years ago.
It would, in your case, apper to be the only way to proceed.
Customer: replied 2 years ago.

I know that you won't predict hmrc response or the outcome, but if I offer 5000 to settle after outlining the penalties expected, or will they simply assume there is more to hide? Would I be better off suggesting that they propose a figure?

Expert:  bigduckontax replied 2 years ago.
Yes, I think that a better solution.
Customer: replied 2 years ago.

Keith you are very helpful and these will be my last questions.

Is there anywhere online I can see the format of a good declaration?

Is there an official hmrc form to download?

How long is the whole process likely to last? I cannot cope with the hell that Harry Rednapp went through.

Thank you

Expert:  bigduckontax replied 2 years ago.
No, but you might dredge the net to see in anyone has posted an example.
You make your declaration on a P85 which can be downloaded. It can even be filed on line too. You will need a separate and the correct one for each tax year.
Expert:  bigduckontax replied 2 years ago.
I am now opting out.
Expert:  TaxRobin replied 2 years ago.

Hello,

The previous expert has decided to opt out.

After reading through your interaction I would like to suggest that you make a complete declaration and as soon as possible.

You first need to seek a local tax professional because you will need to start at the local tax office.

If you have undeclared income, you have broken the law and, from HMRC’s point of view, are guilty of tax evasion.

This means that HMRC can prosecute, but will normally only do so in cases which involve fraud or false accounting.

When you have substantial undeclared trading income over many years you should take the first steps and approach a local tax office.

The tax office will pass your case to an inspector. The inspector will also normally want tax returns completed for all the years concerned. This is why you will want professional assistance.

Once this is all completed the tax will be expected to be paid. If you cannot pay HMRC may allow you to pay on time.

You asked for an official form or example. The form is the tax return completed. If you disclose your income (by completing returns for the years in question) and cooperate fully with the investigation or enquiry that will follow, this should help to reduce any penalties payable.

As to how long the process will take, that is not possible to know.

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