Hi folks, new here, I don't know what else to do other than ask for help, as things really are getting on top of me and I'm getting very down about it, I shall try to summarise.
I am a single self employed (sole trader) , no kids etc , in rural England in my late 40s I am a car enthusiast (old cars mainly) I do mechanical stuff and also buy and sell cars and parts. This came out of a hobby / car club and became a source of income hence registering as self employed.
I am not VAT registered. I have a turnover of roughly 20K a year, the actual profit of which tends to be under the personal allowance so I have been paying little or no income tax most years. I of course pay VAT on anything I buy of course, and fuel etc. I have been keeping detailed business records, all my receipts etc, and enter these into a spreadsheet and submit the figures to a local accountant who files my tax return for me, as frankly that melts my brain and I don't want to make a mistake.
I often have health issues affecting my mobility and ability to work. A few years ago I moved back to my parents' house and rented my house out which belongs to my sister and me. Rent split between me and my sister. So now most of my income comes from the house rental, and I have been saving money in an ISA account for a rainy day / if my health gets worse / help build/diversify my business. I have been living a rather low-outgoings existence, I am not paying rent, I don't drink, smoke and have not been on a holiday for 10 years. I don't travel often (I get anxious easily) and I don't have TV subscriptions, computer games anything like that or even broadband, so I don't need a huge amount to live on. In fact I felt like I was doing alright and managing to save up some money, and had no debt.
In February HMRC decided to do an investigation on me. Not sure why the picked me other than they probably the lack of income tax payment and couldn't understand how anyone could survive on an income below the personal allowance.
I complied with everything they asked, responded to their communications, sent them my spreadsheets, and all my receipts, card machine slips, etc. They then asked for my personal bank statements, as I did sometimes get business payments paid into that account as the fees are less, and the online banking is much better apart from anything (so i sent them those and the ISA one as well just in case) They also asked for a list of anything paid into my Paypal account. I gave them everything. As far as I knew everything was in order and they would have little or nothing to say about things or maybe offer me some suggestions/ help.
The first thing that became apparent was that the part of the rent that was going to my Sister.. I was supposed to be counting this towards my income. I had no idea, since I never thought of this as my money, I was collecting it on behalf of my Sister. (Imagine asking a tenant to pay their rent into two separate bank accounts!) So this was annoying and I figured this would mostly be into income tax zone, the I'd have to pay 20% on it , going back several years. About 5 grand I figured.
I decided to meet with HMRC and went to their stuffy claustrophobic office block 30 miles away. There were two HMRC officers, the guy I had been corresponding with, and another guy. Both were pleasant in manner. I apologised for misunderstanding the way the tax worked and offered to pay any back taxes due. They asked some questions about payments into my personal bank account in 2013-2014, and also into Paypal, where they were unable to see a corresponding sales entry in my business accounts. I explained that not only to I have only one Paypal account but my parents and I share it, and in fact the computer, and even the Ebay account and other things. I didn't think this would be the cause of any problems as long as I had put anything relating to my business into my business accounts. I explained that if it wasn't in the business accounts, it must have been some personal payment from either people I know, selling an item for my Mum or Dad, or perhaps a household item for myself or a friend or whatever. They asked me to prove what the payments were, they didn't seem to accept that it was unreasonable for me to either remember what these payments were, or have kept records.
To my astonishment they said that they would have to count all the unknown transactions towards my income, a kind of presumption of guilt, I had no idea they were allowed to do that.
It gets worse.. Some stuff subsequently arrived in the post. The period that they looked at .. they figured if I had made an error or omitted things there, I must surely have made the same mistake on every other year (going back 7 years) therefore they made up fantasy figures for the other 6 years. I'm talking 3 or 4 grand each year extra in TAX.
This seems utterly insane to me, for me to owe 3 grand extra tax each year, they must be imagining I am receiving 15 grand extra income each year, or about 90 grand. Well I don't see it !
I think they are charging me interest on the fantasy amounts too.
Oh and the cherry on the cake... a penalty for every year for 'presumably getting it wrong'.
The bottom line is, they want about 25 grand out of me. This would basically wipe out everything I have been working for for the last few years, saving up, putting money in my ISA. It would basically.... empty it and it makes me feel like the last few years of working have all been totally pointless.
I have been very depressed over the last few weeks as the deadline to do anything about it looms. I have not even done any work, some days I find it hard to actually get out of bed, and I just can't see the point of working, if someone is going to steal everything I earn.
Has anyone else had anything similar to this? Are there any recommended experts out there that can stand up to HMRC? I was given the details of a place but they want money up front, so I have not done anything about it, as I wasn't sure if that was normal and it feels like a lack of trust.
Ideally I'd like to find someone who would take a percentage of the money slashed off the HMRC figure as their payment. I am crazy for thinking that the right person could negotiate a figure much more inline with tax that is actually due, and remove the penalties?
Thankyou for reading.