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Sam, Accountant
Category: Tax
Satisfied Customers: 14155
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Hi. I am completing a statement of personal assets , liabilities&

Customer Question

I am completing a statement of personal assets , liabilities& business interests for a friend who is a UK Citizen & a UK tax payer but returned to eastern Europe in 2011 to study & now lives there fulltime.
It now appears that he underpaid his tax in 2010- 2011 when he was a self employed sales agent in the uk. His account advisor put down that he received £10,000 when actually clients paid him £31,000!

He inherited a flat in eastern Europe in May 2011. On the guidance notes the form says "the statement should include all assets wherever in the world they are held"
No property is owned in the UK - Just a vehicle registered here.
I have already submitted a detailed list of all his expenses( fortunately he used a debit card!) which amounts to £13000
He had no other income during this time .
Could you please help - he is worried that he will have to pay £6,000 in tax - this being 20% of his income that year.

Submitted: 4 years ago.
Category: Tax
Expert:  Sam replied 4 years ago.

Hi Suzy


Thanks for your question



Why did the accountant file that he only earned £10,000 ? And why did your friend sign to agree the figures that the accountant submitted

Was this income paid with no tax deducted?





Customer: replied 4 years ago.

It wasn,t a qualified accountant who did the work!

Basically they complete returns for a lot of the Romanian labourers who come over here so just assumed he was in the same category ( I know!)


Fortunately my friend didn,t sign the return & they submitted it for him as he was already back in eastern europe by then.


No tax was deducted as he was paid as an agent to look for hotel refurbishment work by the contractor.

Expert:  Sam replied 4 years ago.



Thanks for your response


There is recourse (if your friend wishes to) to sue this individual, as clearly they have made the situation worse for him.

However that aside the position would be as this

Earnings £31,000 less personal allowances for 2010/2011 £6475 - leaves £24,525 liable to 20% tax = £4905 plus Class 4 National Insurance which will be £5715 national Insurance free - leaving £25,285 liable to 8% = £2022.80 - so a total of £6927.80 due plus interest and penalties.


You do not advise whether your friend had any expenses arising which he was out of pocket by, but if these were wholly business related, then these can be deducted from the income earned.

Plus even the return filed with £10,000 income would have seen a tax and Class 4 national; insurance charge arise, so this I assume has been paid, and can be deducted from the overall position.


I would advise that your friend should hire a reputable accountant on his return to the UK to

1) amend the tax return for him

2) Negotiate the penalties charged on the basis of what has taken place and the fact that he did not sign the return in question

3) Offer advise on recourse for your friend against this individual


Do feel free to ask any follow up questions, but it would be appreciated if you could rate the level of service I have provided.



4) Ensure all correct expenses are claimed to reduce this tax bill

Customer: replied 4 years ago.

Hi Sam

My friend has paid all his class 4 NI ( & continues to do so!)

I have already submitted business expenses ( only put down allowable expenses)


So by my calculations he owes around £2,500 in tax?

The girls who did his tax are friends of friends -so its a bit political! - He realises that he was a bit silly to trust them.


My main concern is whether I should declare that he has this property?

He has the resources to pay the above amount. He seems sick with worry that the UK revenue could take his flat!




Expert:  Sam replied 4 years ago.

Hi Suzy


Thanks for your response and apologies for the delay in mine, I have been with clients this evening.

Your friend pays Class 2 National insurance, which is paid monthly/quarterly and is at the current rate of £2.70 a week and this contributes towards a basic state pension (amongst other things) but Class 4 is liable on self employed income, and the proceeds go into the government coffers - towards Education, Health and Fire services etc


Yes you must declare that he has this property, and HMRC will not take it, as long as he rectifies the tax position and if unable to pay all in one go, then negotiates with HMRC with a payment plan.

But the bill will be more than £2500 as there is Class 4 to pay, plus interest and penalties.

But this as a lump sum, will certainly appease HMRC, and any balance remaining he should offer what he can afford per month, and agree to this being collected y direct debit - this always encourages HMRC to allow a payment plan.