Tax problem(7 Posts)
Hi I'm hoping someone might be able to advise me. I'm writing on behalf of my husband. He has been self employed the last couple of years. He has got letters asking him to pay tax for last year. Last year it has been a bit of a nightmare. He has this big project which has over-run and this means he hasn't been paid for it yet. However the company who commissioned it have paid him £30,000 in advance to pay for the equipment needed. So, he says he has to pay the tax on that. They are due to pay about £50,000 for the project so obviously if it was finished and he'd been paid, the tax would be no problem. With the work involved in this project, which was more than expected as someone let him down, his accounts are now all behind. I am a complete novice at all of this, he has just been really getting stressed and saying the tax people will come and take assets, our flat! I told him he was catastrophizing, but inwardly I was panicking too.
Can anyone who has more sense and experience about this sort of thing help me please. I asked could he not talk to the tax people and explain but he seemed to think that would make things worse! He has been in employment with same company for around 15 years previous to this so it is just totally new to us. He has an accountant. Many thanks :-)
You really need the advice of a local accountant, and many will do small business accounts for a flat fee. It really is best to start off on the right foot - you can always take over and do it yourselves once everything is sorted and you know what to do. It may be better to run the business as a limited company rather than be self-employed, and you will need an accountant to advise on that, and also which income/expenses belong in which financial year.
If he's bought stuff for the job with the £30k then it's not profit. You only pay tax on your profits. But obviously you need to keep good records of your expenses. It sounds like maybe he got his tax return wrong by not counting up his expenses. I don't know if you can fix this but an accountant can tell you. It's about £200 for a full tax return and end of year accounts but an initial consultation / chat should be free.
Thanks for your replies. He does have an accountant but seems to be under the impression he will just 'tell him he needs to pay it'?
He has got a letter from the tax people telling him he needs to pay straight away :-(
PS i thought it ould be expenses too. PS We are quite normal, sensible really. Think he's just REALLY stressed by getting the work done so the accounts stuff has sort of gone awry. Wishing he'd talked to me about all of this but think he didn't want to worry me...
OK I think the problem is that due to the tax deadlines the 30K went in to him before the cut off date, then the expenses were bought after that date? I think that's what the problem is :-(
Ok. I see that. But I'm sure that there would have been a way to deal with that. He needs to talk to the accountant ASAP. You can change your tax liable during the year - last year I had a bill which my accountant amended, accountant told me what to actually pay (a lot less) then a few months later the tax office caught up and confirmed everything was ok.
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