I haven't paid book sales tax for years. What should I do?

[foxmccloud]

I have been employed for over 15 years and the employer paid all my taxes. I am not a higher bracket tax payer.

About 5 years ago I started selling a Kindle book. It's a public domain book that I compiled for my own use but then thought I could sell it on Kindle since it already works on my Kindle.

I made about £1000 a year from it for a couple of years and it slowly diminished to around £500 or less.

I never paid the tax because it's withheld in the USA ( 30% taken either by the IRS or Amazon holding it until I clear it up with the IRS - I don't really know), so I thought I don't need to pay it here since the Americans have taken my tax.

However I was in the process of setting up my own company for freelance work and when reading about taxes I realised that I need to pay this.

I am worried about penalties and interest. I tried the HMRC penalty calculator and it's £1600 a year plus the amount of tax I might owe. What is the best option for me? Should I try my best to gather the £7000 or so and pay it to them right now. Or should I contact them and explain what happened, hoping that they might give me less penalties.

I don't know if I need to pay NI on top of the Income Tax. What I am worried about most is how this will affect my new business. Will HMRC want to audit everything I do from now on? I have no other outstanding taxes.

[DavidTreitel]

Refunds in the United States have a 3 year statute of limitations to claim. You'll want to start applying for an ITIN and filing US tax returns soon if you want some of the US withholding refunded.

[TaxAdviser2018]

You should calculate your annual taxable income for each of the years including the income from the sale of the Kindle Book. You will need to check the Double Tax Agreement between the UK and the USA to determine how much of the withholding tax (WHT) you can offset against your UK tax liability. You may be able to reclaim the excess WHT from the IRS.

Once you have calculated your tax liability for each year, you should you contact HMRC as soon as possible. You may need to apply to HMRC for a Unique Taxpayer Reference (UTR) number if you have not been issued with one.

If possible, make a payment on account for your income tax liability and any NIC that you are due to pay. Any late payment interest will be calculated by HMRC and you will be sent a statement of account.

If HMRC seek to apply a penalty, you can appeal this to HMRC in the first instance and if they do not cancel it you can then appeal to the First-Tier Tribunal (Tax). You will need too present any mitigating circumstances as to why you did not pay the tax on time.

[foxmccloud]

Refunds in the United States have a 3 year statute of limitations to claim. You'll want to start applying for an ITIN and filing US tax returns soon if you want some of the US withholding refunded.

I did get the letter from Amazon and sent it to the IRS. They rejected it. So I didn't bother again.

[foxmccloud]

You should calculate your annual taxable income for each of the years including the income from the sale of the Kindle Book. You will need to check the Double Tax Agreement between the UK and the USA to determine how much of the withholding tax (WHT) you can offset against your UK tax liability. You may be able to reclaim the excess WHT from the IRS.

Once you have calculated your tax liability for each year, you should you contact HMRC as soon as possible. You may need to apply to HMRC for a Unique Taxpayer Reference (UTR) number if you have not been issued with one.

If possible, make a payment on account for your income tax liability and any NIC that you are due to pay. Any late payment interest will be calculated by HMRC and you will be sent a statement of account.

If HMRC seek to apply a penalty, you can appeal this to HMRC in the first instance and if they do not cancel it you can then appeal to the First-Tier Tribunal (Tax). You will need too present any mitigating circumstances as to why you did not pay the tax on time.

Great! Thank for that answer, it was very helpful. I had no idea that there may even be a double tax agreement.

[TaxAdviser2018]

You should calculate your annual taxable income for each of the years including the income from the sale of the Kindle Book. You will need to check the Double Tax Agreement between the UK and the USA to determine how much of the withholding tax (WHT) you can offset against your UK tax liability. You may be able to reclaim the excess WHT from the IRS.

Once you have calculated your tax liability for each year, you should you contact HMRC as soon as possible. You may need to apply to HMRC for a Unique Taxpayer Reference (UTR) number if you have not been issued with one.

If possible, make a payment on account for your income tax liability and any NIC that you are due to pay. Any late payment interest will be calculated by HMRC and you will be sent a statement of account.

If HMRC seek to apply a penalty, you can appeal this to HMRC in the first instance and if they do not cancel it you can then appeal to the First-Tier Tribunal (Tax). You will need too present any mitigating circumstances as to why you did not pay the tax on time.

Great! Thank for that answer, it was very helpful. I had no idea that there may even be a double tax agreement.

The UK/USA Double Taxation Convention can be downloaded frol the following website: https://www.gov.uk/government/publications/usa-tax-treaties. Articles 7 and 22 may cover the type of income that relates to the sale of the Kindle Book. Presmuably it is not a royalty payment (see Article 12).

[foxmccloud]

You should calculate your annual taxable income for each of the years including the income from the sale of the Kindle Book. You will need to check the Double Tax Agreement between the UK and the USA to determine how much of the withholding tax (WHT) you can offset against your UK tax liability. You may be able to reclaim the excess WHT from the IRS.

Once you have calculated your tax liability for each year, you should you contact HMRC as soon as possible. You may need to apply to HMRC for a Unique Taxpayer Reference (UTR) number if you have not been issued with one.

If possible, make a payment on account for your income tax liability and any NIC that you are due to pay. Any late payment interest will be calculated by HMRC and you will be sent a statement of account.

If HMRC seek to apply a penalty, you can appeal this to HMRC in the first instance and if they do not cancel it you can then appeal to the First-Tier Tribunal (Tax). You will need too present any mitigating circumstances as to why you did not pay the tax on time.

Great! Thank for that answer, it was very helpful. I had no idea that there may even be a double tax agreement.

The UK/USA Double Taxation Convention can be downloaded frol the following website: https://www.gov.uk/government/publications/usa-tax-treaties. Articles 7 and 22 may cover the type of income that relates to the sale of the Kindle Book. Presmuably it is not a royalty payment (see Article 12).

Thanks again. I have a lot to read