Dormant Company - Tax Being Claimed

[megzy]

Hi

My partner was a sole trader and up until 3 years ago and at that time he declared the company as no longer trading (his accountant at the time informed HMRC, and they have a record of the date)

He has now received a bill for £3k in tax/penalties for the time period when he was not trading. He has been employed full time by a company and paying tax/NI the last 3 years.

In calling HMRC he has been advised that he has to contest the penalties as even thought that company has ceased to trade, he should be filling in a tax return for his new job (but he isn't self employed and they are totally separate?)

No idea how this all works, or what we need to do so any advice would be greatly appreciated?

Thanks

[pawncob]

If he included the cessation on his tax return, no problem. If he didn't then he should have completed further returns.

[RMC]

1. Presumably you mean 'dormant sole trader' not dormant company?
2. Meaning that business did not close down, only had no income for the past 3 years? Did it continue incurring costs during this period?
3. When do you expect your friend will start properly trading again?

[megzy]

He stopped working for himself in Sept 2013, made HMRC aware he would no longer be trading as starting full time employed work (they have this on their system that they were notified), started working for a company Dec 2013, his tax return was sent the following April 2014 at the end of the tax year for what he had worked when sole trader up to Sept 2013.

There has been absolutely no activity since the day he notified HMRC he no longer was working for himself.

The letters are £3.5k worth of fines for no tax paid 2014 - Present, but he hasn't traded since Sept 2013.

Thanks

[RMC]

May I suggest that he gets an understanding accountant. I am sure there are some on this site.

[SteLacca]

If all his income during the period that HMRC claims Returns are required for was properly taxed at source, provided that he hasn't submitted them he can request withdrawal of the Returns under S8B TMA 1970 on the grounds that no tax liability will arise, and so no requirement under S7 existed.

[bd6759]

Phone HMRC (your partner will need to do this himself). Explain the situation, Tell them that there is no income to declare since self employment ceased and ask them toi withdraw the requirement to submit a return.

Make sure your facts are straight. You mention a dormant company. If he had a company, he was not self-employed.

[The Accounting Studio]

If he had a company firstly he wouldn't be self employed.
He would have to complete a self assessment tax return by virtue of him being a director. If he contacted HMRC to tell them that he was no longer "self employed" that would not have triggered the company (which is a separate "person" for tax purposes) to become dormant and cease trading.

It sounds like you may have a challenge on your hands to convince HMRC, although they should have contacted you before now rather than slapping a big bill on your with no warning - give you the opportunity to rectify the situation