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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a friend who has worked in casual building/labourer

Customer Question

I have a friend who has worked in casual building/labourer work for a few years. He is not particularly knowledgeable in tax issues or paperwork things and as such has been happy to be paid by or through a third party entity who secured the work and managed the work. In effect he was the employer, however it turns out has never actually paid my friends tax or NIC. i.e. he never received payslips and neither the main builder or he actually paid tax. In short we are now advising him now to go self employed and register online to try and get this sorted out, however the 'big' worry and concern is addressing the problem now and the work and earnings to date and any penalties and consequences that may be incurred as a result.
What advise could you provide on how to approach the previous period of earnings and missed tax, or 'not'. Will this be considered by the taxman if he registers now for self employment ? Should he declare this openly or just not raise the topic ? Will it even be brought up by HMRC ? Clearly he would like to move forward but properly but doesn't know how to do this without creating more serious problems !
Confused on Self Employed Issued ?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Can you tell me how long this has been going on please. Is your friend still working for the "employer"? Who is the third party? Is your friend paid cash? Does he bank it? What assets does he have? How old is he?
Customer: replied 2 years ago.

This has been going on for at least 5 years, maybe up to 8 years.

Yes he is still using this 'employer' as the main source of work and income. Money is paid in cash and/or paid into a bank account directly from either the 'employer' (a private builder/company), or the 'client' who does on occasion pay money into the bank account.

He has no real assets such as house owner, etc,... never been in the system properly it appears since doing this building labouring work.

He is about 37 I think. He also has trouble reading/writing,...etc

Expert:  TonyTax replied 2 years ago.

Leave this with me while draft my answer. It will take a while.
Customer: replied 2 years ago.

Thank you

Expert:  TonyTax replied 2 years ago.
Hi again.

There are financial penalties for failure to notify HMRC,for failure to complete self-assessment tax returns and for late payment of tax. Take a look here for more information.

Frankly, it beats me how the employers/agencies in this type of thing stay under the radar for so long. If your friend has been working on construction sites then he should have been told to register as self-employed and with the HMRC Construction Industry Scheme (CIS). The employer-contractor would need to deduct tax at 30% form the pay of any individual who is not registered or 20% from an individual who is registered. Take a look here and here for more information.

If your friend decides to come clean so to speak, then the people he works for could be in trouble themselves and that might have a negative impact on your friend. If he decides to register as if he has not worked before, then at some point he may be asked about his work history, especially if HMRC have no file for him.

My advice would be to take your friend to see an accountant or tax adviser with a view to seeing if its possible to put some income figures together which is probably a forlorn hope in the absence of records. Fees for investigation cases can be high and non-existent records leaves the door open for HMRC to go to town. If you can find an adviser to approach and negotiate with HMRC then that will be less stressful for your friend but he will need to be able to pay some tax, interest and penalties. It might be possible to negotiate payment terms with HMRC but none of this will be easy.

I'm afraid that there are no easy solutions, especially since your friend appears to be working for somebody who is operating outside the system themselves. What I would say is that your friend should bite the bullet and do something as the longer the current situation goes on, the bigger the problem becomes.

I hope this helps but let me know if you have any further questions.