Huge tax bill

[lolacoxox]

In need of some advice please - my boyfriend has his own company and has had it for a few years. He works alone so no team. He has never payed tax and has always said he would sort it so believed him and stupidly asked no questions.

We own a house together and have a child on the way.

He has now got an accountant to sort his taxes out for him and it turns out he owns £40,000!!!

I am beside myself with worry. Cannot pay this and don't know our options. I'm so mad. Any advice welcome please.

@Crackednuts what on earth are you talking about? A £40k tax bill is entirely possible. It equates to an annual income of approx. £120k or could cover multiple years at £60k-£70k.

My sympathies to the OP for the precarious position her DP has put her in. He deserves no sympathy whatsoever. Tax evasion is a crime and not one that is committed by mistake.

OP take care re the posts saying if the tax liability relates to a company that he needn't worry as the position isn't entirely clear cut.

Things to consider:

1. If the tax liability is based on a hmrc estimate then the estimate is valid unless and until it is successfully appealed;

1. If HMRC are pushing for payment it is essential he stops burying his head in the sand as they will take enforcement action which could include applying to put the company into liquidation.

If that were to happen a liquidator would investigate the running of the company. Failure to pay taxes MIGHT, particularly if other creditors have been paid result in:

(I) recommendation to the DTI that director disqualification proceedings are issued against him banning him from being a director;

(Ii) result in a liquidator issuing proceedings against him personally - many people do not realise this is possible but it absolutely is not uncommon. These types of proceedings are expensive and time consuming often taking years.

I'm not saying that the above will definitely happen, but it would be a mistake to believe he is ok from a personal perspective because it's a company liability.

Has he actually kept accounts during this period of time?

Has he ever done a tax return even in his first year? Did he register as self-employed?

Don't forget he hasn't paid national insurance either which will seriously affect his state pension.

No no no. You then get clobbered for business rates

Agreed, I'm self employed, how long has he not paid and how much does he make? It seems an absurd amount to me unless A/ He makes a packet, B/. its been a long time.

Has he done the deductions?, if he doesn't have the receipts it is possible, but slow to crawl back through bank statements, getting copy invoices from suppliers etc. Make sure everything that can be deducted has been.

Remember anything for business can be deducted:
Phone bills (solely for business)
Van purchase / running cost / fuel
Materials and supplies
Lunches (subject to HMRC guidance notes)
Overnight accomodations
If working from home, percentages of utilities
Computer / Phone equipment (if used solely for business)

Also he will need to pay ahead 50% of next years tax based on this year, but if he's bunged everything on this return the pay ahead figure will be sky high when it should in reality be based just on last year.

I can see it happening if it’s a couple of years and hes just started. Your accounting period is extended when you first start. You can also extend it a bit further by changing the dates (we had to do this to bring in line with financial year as opposed incorporation date).

So it absolutely can be a couple of years and he hasn’t forgotten. Just not done it before.

How do you know how much or how little tax he owes? If its been a few years then £40k doesn't actually sound that much.

And that's when you have to make sure the payment in advance is correct, based on just a years trading.

If self assessment, is he sure he’s submitted all his expenses to his accountant? That can bring the amount down substantially if he goes through everything with a fine tooth comb. Lots that you can claim as ‘expenses’.

Especially if, like me, he's a tradesman, every bit of material I buy is deductible, as are tools, equipment etc..

It can be very substantial.

I have heard about that. I dont know how but we never pay in advance.

Every year we have a nightmare with it tbh. We do our accounts. Submit and say we owe this, HMRC sends the invoice. Then another which contradicts the first one. Then another one back to the original. Then another with price B.

It chaos every year. I say to the accountant what the hell is going on. He just says the left hand does not know what the right hand does.

But how!!!! Surely theres one account, one filing, one computer record. But no.

So yes it’s currently happening atm. HMRC are simultaneously saying I owe zero, a rebate and a tax bill in different letters 🤷‍♀️ when we have told them that we do think we owe x tax.

This reminds me I need to the ring the accountant again tomorrow to get him to call them.

@Crackednuts

It shouldn't be that problematic, you just fill in the turnover and allowable expenses fields on .gov and you get the total there and then, it becomes active to pay 72 hours later, pay up, job jobbed.

You would think that but for some reason if we leave it a week we get a new contradicting letter every time! Followed by a flurry of simultaneously contradicting letters.

I just wait until the letters become consistent with what my accountant is saying it should be. Which usually takes c. 6 weeks and my accountant making multiple phone calls.

I will I will read the complaints about HMRC and accountants who tell their clients they owe nothing. It doesn't hurt by the sounds of it to get a second opinion. The amount of receipts a tradesman collects is a lot which is why I am surprised. If he's like my partner he is spending a fortune on his vehicle.

That's why I do my own, son of an accountant, mum taught me what to do, and it really is very easy - but time consuming to do right.

I have mates who go off to their accountant with 12 months worth of paperwork in a Tesco bag, the accountant charges say £200 to do it - it can't be done properly for that IMHO.

Has he been taking dividends and not set aside money for tax?
Depending on the state of the company he can pay himself more dividends and pay hmrc.
The house is safe as it's a limited company, unless hmrc take him to court to gave the ltd removed - this is rare though

First job is call hmrc, and get a payment plan in place. The accountant can advise.

Hmrc are not monsters, they will try and make a plan which is workable.

Get yourself untangled from him. Run your free credit report, look up his company on companies House. Get your name off anything to do with it.

Don't have a joint account. He needs to run and show you his credit report. Suggest you see all the paperwork too, and get the accountant to take you through it. Listen, ask questions and ask where the money has gone!!!

Ask for a repayment plan. I'd be telling partner he will have to cut back on his spending for the next couple of years.

We don't know if its Ltd or not, the OP uses the term company but says he works alone, so likely sole trader.

company is not a protected term, whereas Ltd. is, so the wooden worktop company may or may not be limited, the wooden worktop company ltd. is.

The company is 'a few years' old, with no tax paid to date. If HMRC are aware, the amount may include substantial fines and interest for not filing or paying. If they are not yet aware, it could easily represent a few years' trading. The post appearing at the end of January makes it sound like a sole trader up against the self-assessment deadline. Any accountant should be able to get on top of this, unless it's a very specialist trade with unusual activity (eg foreign complications).

The key difference is that a sole trader (DP) is responsible for debts whereas with a limited company, generally speaking, the company is liable and not its directors or shareholders

And this is exactly why you pay an accountant for advice rather than asking Mumsnet!

Sorry but he's a complete and utter idiot. Does he think it's okay for everyone elses taxes to pay for the NHS services and Education etc his offspring will need while he wanders through life paying heehaw?

FYI the 0330 HMRC line is a premium line and it will be very busy with self assessment queries this week so if he’s struggling to get through to someone he can talk to it will be better next week

I might be a lone voice here but I’m sympathetic to the OP and her DP. The time delay before you have to file accounts creates an illusion you have time to sort it, it’s hard to find time when you’re trying to get a business off the ground and it’s hard to get your head around the accounting side

a good accountant is essential