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Sam
Sam, Accountant
Category: Tax
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Ill try to make this as short as poss-- Im a director of a

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Hi, Ill try to make this as short as poss-- Im a director of a small company, under Vat registration, trading from 2008, no other employees. I had an accountant from 2007-10 who completed my accounts and submitted them and who always paid me by dividend no weekly/monthly wage. At this time it was around 10k annually. In 2010 I signed up to the hmrc online and since then completed my own returns by following the instructions of the software as well as taking note what my accountant had previously done. Well now we are in 2016 and HMRC have walked in and arranged for a compliance check next week so while going over everthing this is what Ive discovered top my horror and I need advice urgently on what way to approach the situation.. My year end is 31/8 and they have asked for 4 years accounts...so I just completed 15/16 year so will show a draft for that year, 14/15- submitted to company house earlier this year but for some reason not submitted to hmrc, 13/14 submitted and corp/tax paid (1500), 12/13 submitted and corp tax paid (900) Now they have asked for payroll so while searching on the web apparantly what I should of done is pay myself low wage paye then top up with dividend then submit a self assessment declaring all !! even if i was only taking a dividend a self assessment should of been submitted !! this has never be done!! and looking at my balanced accounts over the years ive 12/13 dividend paid= 5000 + renumeration in accounts 7488 (but not submitted on a paye only via accounts as i actually thought at the time hmrc would simply bill me for any nic/incomtax) 13/14 only dividend in accounts £5000, 14/15 -only dividend 5000 shown and only sumitted to company house not hmrc , 15/16 nothing as yet submitted as not due but could maybe correct a few things ?? so my question is no self assessment submitted since formation, at university 2008-2011 but still trading, should i submit online self assessments for 4 years before these guys arrive? paye? the idea of living on 5k per year real;ly doesnt look good and asks questions which I donot need so think it best to submit the wage of at least 7488 also ?? like i have in my accounts 12/13 but not registered paye? With 13/14 not yet submitted to hmrc only to company house, as well that 15/16 not due so perhaps corrections could be made? i think it best for me to correct the situation before they arrive than them find it and perhaps widen the scope of the search?? im sure there will be fines but not half as much as if they discover? do you think 4 years is enough of should i go back to incorporation? Sorry to ramble but Im trying to give you as much info as I can so you fully understand the question . regards D
Submitted: 4 months ago.
Category: Tax
Expert:  Sam replied 4 months ago.

HI

Thanks for your question

In your favour it may well be that had you paid yourself a part wage - that this would have not given rise to tax but to some Class 1 employee (and Employer) National Insurance.

But yes you should have been completing self assessment and whether you do this now or await the instruction from HMRC through their compliance check this will not later how HMRC view this enquiry.

1 would be inclined to wait - because if there is no tax or National Insurance position arising, you can then just argue the fact that

1) as there was no tax liability arising - you did not realise that self assessment was required - (or that National Ihnsurance would arise) and this was on the basis that

2) You followed suit with what your accountant had undertaken for you

The sticky bit in this - is the fact that a salary was paid in 2013/2014 for £7488 - and I am afraid arguing that you thought HMRC would bill this for you - will not be accepted as you were submitting company information not employee information, or you as a director style information.

But Can you advsie what you mean when you are concerned that HMRC might widen the search? Do you mean going all the way back to when you first started this company?

And how did you live on £5000 a year when you advsie thats all your took from the company (or at least what you declared) IF you genuinely only took this out then do not declare a wage that doesn't exist - you are making matters worse than they are.

I fear HMRC are going to expand their search whatever you do or dont submit now, but any submission you make now will be seen to cover tracks - so will worsen the situation for you

MY expert advsie, let them review the position - be honest that you have made mistakes when they present them to you and ask how to rectify the position.

If they accept its a genuine mistake - then the penalties will be low - if they find its deliberate then the penalties will be higher - but if you have taken money from the company other than the dividends then unless below the 20% threshold in combined income and less than the tax and National Insurance limit generally then there will be these to pay plus interest and penalties

Let me know if I can assist further

Thanks

Sam

Sam, Accountant
Category: Tax
Satisfied Customers: 13704
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Customer: replied 4 months ago.
Thankyou for your advise ......its was helpful......when i say widen the the search i mean asking for all my personal bank details etc and checking records right back to 2007 or as far as they can ie 6years as lets face it in today world 5000 really doesnt go far ... just trying to minimise penalties etcthanks again
Expert:  Sam replied 4 months ago.

Hi

Thanks for your further questions

If they feel you had other incomes that were not declared then yes, they could well ask for all your personal bank statements but they will go back to 2007 anyway once they see that payroll (PAYE) has not been run for any of the salaries drawn and will probably ask how you lived on just £5000 a year when you state most years you did not draw a salary.

But the personal side of matters will only arise once self assessment tax returns are filled in and IF they feel they have reason to believe these are inaccurate - as of yet you are yet to declare your own personal position so they are unlikely to delve into you as an individual at this stage

Thanks

Sam

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