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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4808
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My friend here in the UK received a letter from HMRC last

Customer Question

Hi - My friend here in the UK received a letter from HMRC last week about a VAT inspection. She panicked and realised that she has around £120k of undisclosed income which has built up over 10 years. She has contacted someone for support who has explained her disclosure is now prompted and she cannot go down the voluntary route.
What is the likely outcome of this for her in your opinion? She does not want to face prosecution and wants to receive the lowest penalties possible. Your advice and opinion would help.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Currently the VAT Turnover Threshold is 82K in any one year. If your friend exceeds or approaches this then she should register for VAT. Here is the link: If she is below the turnover level then the VATman can go hang! VAT is a turnover tax and only distantly related to income. You may well need to come back to me on this one.
Customer: replied 2 years ago.

Apologies, I don't think i made clear my issue. I had an investigation carried out and because of undisclosed income over 10 years I owe around £70K in unpaid tax and on top will be penalties. I cannot afford to pay it all at once. Do you think HMRC will be open to a payment plan over a few years?

Expert:  bigduckontax replied 2 years ago.
You will have to negotiate a repayment schedule with HMRC that you can afford. In the old days when income tax was a preference debt they were keen to wind you up. It is no longer preferential so HMRC rank pari passu with every one else so that game isn't worth the candle any more. Your alternative is to present your own petition in bankruptcy. HMRC might get nothing, but you would loose everything.
Customer: replied 2 years ago.

He really doesn't want to file for bankruptcy at all. He would prefer to agree to pay it all over 4 years. Do you think they would be open to such things? He has a house he can sell but would ideally not want to do that. He read online that HMRC usually want repayment within a year but he could not afford that without selling the house. Do HMRC have flexibility these days to do payment plans for a duration of around 4 years? For example he can offer a third of what is owed up front and then pay the remainder of a 4 year period.

Expert:  bigduckontax replied 2 years ago.
As I said he can but ask. Even HMRC accept that it is better to wait a bit and collect the lot than fall half way through the race. It may be adviseable to use a local, trusted professional to undertake the negotiations.
Customer: replied 2 years ago.

Have you come across this kind of scenario before where the amount owed is circa £100K including penalties? If so did HMRC show flexibility back then and agree a payment plan?

Expert:  bigduckontax replied 2 years ago.
It is not uncommon. Everyone is short of readies these days. I have known it acceptable.
Customer: replied 2 years ago.

Do HMRC enforce that you well your house or is that a last resort?

Expert:  bigduckontax replied 2 years ago.
Well they can try if they obtain a judgement debt against the errant taxpayer, but we are a long way from that yet. If it is jointly owned with his spouse then they cannot touch it even in bankruptcy.
Customer: replied 2 years ago.

He has two properties, one owned with partner and another jointly owned with a friend. I would hope HMRC therefore realise that it is best to negotiate the settlement over a number of years. He also has a mental health issue as suffers from panic attacks and anxiety and has been on medication to control it for 18 years so evidence of the mental health issue is there. I think I read that he therefore has to be treated sensitively which in practical terms means being negotiated with using least pressure possible. Is that correct?

Expert:  bigduckontax replied 2 years ago.
My Lawyer has the following comprehensive advice: Your friend must seek local professional advice. Then the appropriate information can be brought forward and HMRC made aware of the position.
Customer: replied 2 years ago.

Thanks for that.

Expert:  bigduckontax replied 2 years ago.
There is a lot of money at stake here, your friend should tread very warily with professional advice. Please be so kind as to rate me before you leave the Just Answer site.