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Where Taxpayers and Advisers Meet

Help - Friend in trouble with HMRC

J20x
Posts: 4
Joined: Tue Feb 18, 2020 2:02 pm

Help - Friend in trouble with HMRC

Postby J20x » Tue Feb 18, 2020 2:29 pm

Hello all,

A very close friend of mine seems to be in a lot of trouble with HMRC and is worried sick that she will be prosecuted by them.

It all started just before Xmas when she received a letter out of the blue from them stating that they had reason to believe that she has not declared all of her income. The thing is, that this is completely true as she has worked for years on the side doing health / fitness related activities but never filled in a self assessment form.

She has always worked part time in a relatively good job earning about £12-15K per year from this in today's money.

However, over the years her side work has grown and she makes ~ £7 - 12K per year from this. She told me that she has been doing this for over 10 years now but has never kept any records.

She has no idea what to do and has decided to bury her head in the sand and has told HMRC that this is a mistake and denied any wrong doing - she has deleted her FB account and other online accounts where she was explicitly advertising her business with rates etc. Some of the rates were as much as £30 £35 / hour.

I tried to persuade her to speak with them but she insists that this will just blow over but she has been asked by HMRC to provide the following:

List of all undeclared income
List of bank accounts including any credit cards
Last few years bank statements

My questions are:

How would HMRC have found this out?
Will this just go away as surely HMRC have bigger fish to fry?
How long can this drag on for?
Can they force her to provide bank statements?
She owns her own home outright (~£280K) along with a couple of cars - could they take this from her?
How much would an accountant cost?
Could she end up behind bars?

robbob
Posts: 2914
Joined: Wed Aug 06, 2008 4:01 pm

Re: Help - Friend in trouble with HMRC

Postby robbob » Wed Feb 19, 2020 10:03 am

Hello j20x - you really are in a horrible position of trust here as it sounds like this individual does not want to do the only acceptable thing that needs to be done - my advise would be to either help guiding her to make a full and frank disclouse if she wants and needs your support, or if she refuses to see the light step back and remove yourself from the situation so that you don't feel guilty about the end position - some individuals when it comes things like this refuse to take the only sensible option unfortunately - there is no middle ground going forward from where she is.

I would guess hmrc are unlikely to throw the book at her.
Probably not if she immediatly changes her tune and makes full and frank disclosure.
She has no idea what to do and has decided to bury her head in the sand and has told HMRC that this is a mistake and denied any wrong doing
Sigh - this is a big issue if she cannot see the problem here that she has created and she needs to take responsibility for that she needs to declare her full and frank income sources to hmrc then she is probably beoyond help and deserves and book thrown at her. everything i will post below will be on the basis she takes the opportunity to turn her attitude on its head and decalre her income as fully and accurately as possible.

she is best to engage and accountant - but accountants aren't miracle workers if she continues to be evasive about what she has done and when - with hmrc its all about being as accurate as possible - being blunt some people actively try to avoid being pinned down on facts and she needs to make sure she takes tis opportunity to get a clean slate.

How would HMRC have found this out?
You won't know - highly likely via online trwal of facebook/paypal etc based on what you have said.
Will this just go away as surely HMRC have bigger fish to fry?
Errr no - hmrc aren't psychic - until she declares as accurately as possible her income and expenses hmrc don't know that she isn't a big fish. HMRC should treat all taxpayers equally whether big fish or not really if there is lost tax at stake - everyone else has to go to the trouble of calculating income - declaring and paying tax why should she be left alone for someone else to be fried?
How long can this drag on for?
Probably only as long as she drags it on for - if she provides sensible figures hmrc are likely to accept those figures at face value unless they have specific information otherwise - main thing though is not to compound the initial error and now state less than her true level of income
Can they force her to provide bank statements?
Absolutely- as she has atrade its up to her to have adequate information of ins and outs - if she doesnt she should expect hmrc to potentally request ALL her financial info including credit cards are the like.
She owns her own home outright (~£280K) along with a couple of cars - could they take this from her?
Errrr - she sounds like she is a very lucky individual who has the trappings or a good life (probably helped by not paying her fair share of tax.
Practicably speaking its up to her how she finds thje money she owes whether she takes loan / remortgage or sells one of her cars ? why would she think they "wouldnt" want to take the money she owes ?
How much would an accountant cost?
Very variable - it really depends on who you engage and the quality of information and dicolures she makes - it will cost more if she doesnt do the donkey work of trying her best to identify or estimate all income and expenses and listing them to the best of her ability and ensuring all relevant records are avaailble if they can be. eg bank statement payap statements etc.
Could she end up behind bars?
Providing she makes full and frank disclouse i would have thought its extremely unlikley - although the above comments suggest she has made the worst possible start trying to stay out of trouble by directly lying to hmrc so perhaps she is beyond help? - ideally she needs specific advise though in that regard and needs to be 100% honest and transaprent in her disclosure. On the face of it she is the perfect person unfortunately to make an example of - many people are in financial distress and forced down an unsavoury route as they can't pay the bills to keep a roof over their head - for someone who has a fully paid house and is driving around in multiple cars it sounds on face value to me that she really has made a conscious decision to feather her own nest at the expense of the less well off whatever excuses she makes.

J20x
Posts: 4
Joined: Tue Feb 18, 2020 2:02 pm

Re: Help - Friend in trouble with HMRC

Postby J20x » Wed Feb 19, 2020 2:02 pm

Hi Robbob,

Thanks a lot for your reply.

I will print this out and show it to her in the hopes that she sees sense but I have my doubts as she seems intent on trying as hard as possible to just let this whole thing blow over.

She has stopped responding to any HMRC letters now and just doesn't seem to understand that she should have registered her business as she was making decent money from it.

I don't see how if it goes to court, she could explain how by only working 12 hours per week she has managed to buy her house outright, own 2 cars and live a decent lifestyle. None of it makes any sense.

I will try once more and then leave it on her own head.

Thanks again.

wamstax
Posts: 1890
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Help - Friend in trouble with HMRC

Postby wamstax » Wed Feb 19, 2020 3:11 pm

You could of course advise her that there is no surer way to end up on the end of a potentially excessive assessment ( with excessive tax interest and penalties) and potential bankruptcy when HMRC raises their inevitable discovery assessments and puts debt management after her.

Worse of course is that if HMRC have the evidence available to them to prove substantial evaded profits ( and trappings of wealth - house paid for and cars) then the case could escalate to Taxes Criminal - with the potential for prosecution. Nothing surer to escalate cases to Taxes Criminal than lying to HMRC when under enquiry.

Remember that websites never disappear and HMRC will already have the evidence when they were risking the friends case for enquiry. Also they already have information from Paypal as regards money being paid to non registered traders.

Additionally lack of records retained will not help your friend as it leaves HMRC to fantasise and estimate the size of the profits.

She really needs to engage the services of somebody that knows how to get matters back on course towards a civil settlement as opposed to the criminal route.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

J20x
Posts: 4
Joined: Tue Feb 18, 2020 2:02 pm

Re: Help - Friend in trouble with HMRC

Postby J20x » Fri Feb 21, 2020 11:52 am

Thank you for your reply.

I will tell her all of this tomorrow when I meet with her and then leave it there as I get stressed just thinking about this.

J20x
Posts: 4
Joined: Tue Feb 18, 2020 2:02 pm

Re: Help - Friend in trouble with HMRC

Postby J20x » Mon Feb 24, 2020 12:15 pm

Hello,

I met with my friend over the weekend and she is still determined to just ignore things in the hopes it will go away.

She did raise a few questions if anyone is able to help please.

How can HMRC actually get hold of bank statements if the person does not cooperate?

How long does it normally take HMRC to get bank statements? Will she be notified about this?

If HMRC decides to estimate the figures, how does this normally work?

How long does it typically take HMRC to come to this estimation and then start to chase it via a debt collector?

Thanks again!

robbob
Posts: 2914
Joined: Wed Aug 06, 2008 4:01 pm

Re: Help - Friend in trouble with HMRC

Postby robbob » Mon Feb 24, 2020 12:48 pm

How can HMRC actually get hold of bank statements if the person does not cooperate?
They simply use thjeir available powers and get documentation directly from the bank

https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch207320
https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch21540
How long does it normally take HMRC to get bank statements? Will she be notified about this?
Good question - i would expect it to be reasonably transparent in that , if asked and she refuses then time will take its course - and it should be reasonably evident her refusal will start the process and further questions will follow from there.
Note it may be that hmrc already have info in their possession if that is the case its unliklely they will let on.
If HMRC decides to estimate the figures, how does this normally work?
Expect them to spend minimal time presuming income in question is as high as possible based on know information to minimise the chances tax is underpaid.

How long does it typically take HMRC to come to this estimation and then start to chase it via a debt collector?
Any time scale is possible

Lets be clear here with an enqiry the individual will need to sign a statement at the end of the period confirming that they have declared income due and paid all taxes - it is not the case that the individual can simply hope hmrc will come up with a low ball settelment without risking severe punishment by basically lying when they sign the final settelement document - so for every year in question letting hmrc come up with a figure is not really an option unless the individual knows that the hmrc figure is higher than reality and they are happy with that. Of course if they are happy to lie to hmrc and face the consequences of following this through to the end scenario they can try and get away with whatever they want. If i were you i would stay away from helping any individual who choses this course of action.

wamstax
Posts: 1890
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Help - Friend in trouble with HMRC

Postby wamstax » Mon Feb 24, 2020 2:37 pm

This is not a forum to entertain or assist DELIBERATE tax evaders and your friend will hopefully rue the day he/she decides to lie when caught deliberately committing tax fraud and then trying to lie and get off with the misdeeds.

If the question about time delay is designed to gain an advantage to escape the creditors their are procedures in place globally to enable one tax authority to get its foreign counterpart to pursue anyone who may have sought to escape their debts by fleeing the country.

Also HMRC as already said may have all the evidence they need and refusal to cooperate and attempts to sell off property may just escalate matters quite quickly
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

wamstax
Posts: 1890
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: Help - Friend in trouble with HMRC

Postby wamstax » Mon Feb 24, 2020 2:42 pm

Oh yes forgot to mention that even if she doesn’t get prosecuted her deliberate tax evasion will be published as a serious and deliberate tax evader if her taxes evaded exceed £25k
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website


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