Fear of the Inland Revenue
Discussion
My better half has been in the higher income bracket for a few years now and as such is supposed to file her own tax returns. However, she has never been asked to do so, i.e inland revenue has never made any contact with her. Shes feeling that she should contact them but is worried they might look back over the years they didnt contact her and send her a ruddy big tax bill to encompass every year shes been out of their sight, so to speak.
So what should she do? Will they check back just for this year or all years?
Of course there is the possibility she has overpaid and might receive a bug cheque but I doubt it.
So what should she do? Will they check back just for this year or all years?
Of course there is the possibility she has overpaid and might receive a bug cheque but I doubt it.
Its her responsibility to ensure she completes a tax return, not Revenue's responsibility to chase. This doesn't really help as Revenue will tell you, if you ring them up, that you need not submit a tax return unless they send you one in the post.
She could speak to an accountant who could calculate liabilities for her before she engages Revenue.
But be warned, once they get a sniff of her, if there's a debt, they'll hunt her down like a dog and persecute her as if she was a Scotch egg at a BarMitzvah!
She could speak to an accountant who could calculate liabilities for her before she engages Revenue.
But be warned, once they get a sniff of her, if there's a debt, they'll hunt her down like a dog and persecute her as if she was a Scotch egg at a BarMitzvah!
I'm not really sure, but stewing about it ain't gonna help. They'll get her one day if they want to.
Just yesterday i got a letter from my composite company saying as i had earnt £42k this year i was underpaying tax and was personally responsible to pay £4,500 in tax before Jan 2006!!!
In actual fact i have only been contracting since March, and luckily they had entered my salary details wrong! I wish i had earnt £42k but sadly i haven't
I nearly started a rant thread here yesterday as i couldn't believe that someone would be held respnsible for such an amount of tax. Its bad enough as it is - all i was trying to do was earn enough money to go back to university for a masters, now that there aren't any grants left..!
Edited to say that there are ways that she can reduce a liability if she is clobbered. Straight off the letter i have in front of me:
1) Pension Plan
2) Ensure all business expenses that are incurred in the performance of your duties are claimed for as these may attract corporate and income tax relief.
>> Edited by Buffalo on Friday 14th January 18:03
Just yesterday i got a letter from my composite company saying as i had earnt £42k this year i was underpaying tax and was personally responsible to pay £4,500 in tax before Jan 2006!!!
In actual fact i have only been contracting since March, and luckily they had entered my salary details wrong! I wish i had earnt £42k but sadly i haven't
I nearly started a rant thread here yesterday as i couldn't believe that someone would be held respnsible for such an amount of tax. Its bad enough as it is - all i was trying to do was earn enough money to go back to university for a masters, now that there aren't any grants left..!
Edited to say that there are ways that she can reduce a liability if she is clobbered. Straight off the letter i have in front of me:
1) Pension Plan
2) Ensure all business expenses that are incurred in the performance of your duties are claimed for as these may attract corporate and income tax relief.
>> Edited by Buffalo on Friday 14th January 18:03
If she is due a refund there will not be any interest to pay.
Things that might lead to a refund.
High number of business miles in a private car for which she receives less than the IR authorised rates.
Professional Subscriptions.
Pension Payments made Gross (unusual these days)
Any self employed activities that are loss making(the loss acn be offset against total income)
Things that might lead to a refund.
High number of business miles in a private car for which she receives less than the IR authorised rates.
Professional Subscriptions.
Pension Payments made Gross (unusual these days)
Any self employed activities that are loss making(the loss acn be offset against total income)
OK. For a start don't worry.
The reason why most people don't have to file a tax return is that they are paid PAYE - pay as you earn. This means that the higher-rate tax is deducted AT SOURCE just like the lower rate tax.
At the end of each PAYE year any underpayment or overpayment is dealt with. This often means the March paycheque is larger or smaller than usual. If the amount is too large to deal with by this method then normally an adjustment is made to the employee's tax code and the tax is collected in the next year.
OK. So why fill out a tax return at all? Well - because if you are a higher rate earner and have savings accounts in banks and similar then the bank will have deducted tax in the interest AT SOURCE but only at the lower tax rate. Therefore there may be some tax owing - being the difference between 25% and 40% tax on the interest on your savings.
Similar things go for investments. Capital Gains are a different matter.
And so - to recap - chances are your lady hasn't been being sent Tax Returns because its been dealt with through PAYE. The Revenue often don't WANT you to complete tax returns as most people find they have overpaid slightly, even after interests on their savings.
However. She should probably start completing them as of next April. Get a Tax advisor to do it to take the stress out.
The reason why most people don't have to file a tax return is that they are paid PAYE - pay as you earn. This means that the higher-rate tax is deducted AT SOURCE just like the lower rate tax.
At the end of each PAYE year any underpayment or overpayment is dealt with. This often means the March paycheque is larger or smaller than usual. If the amount is too large to deal with by this method then normally an adjustment is made to the employee's tax code and the tax is collected in the next year.
OK. So why fill out a tax return at all? Well - because if you are a higher rate earner and have savings accounts in banks and similar then the bank will have deducted tax in the interest AT SOURCE but only at the lower tax rate. Therefore there may be some tax owing - being the difference between 25% and 40% tax on the interest on your savings.
Similar things go for investments. Capital Gains are a different matter.
And so - to recap - chances are your lady hasn't been being sent Tax Returns because its been dealt with through PAYE. The Revenue often don't WANT you to complete tax returns as most people find they have overpaid slightly, even after interests on their savings.
However. She should probably start completing them as of next April. Get a Tax advisor to do it to take the stress out.
I was in a similar position until last year. Had been in the higher bracket for a while, but never filed a tax return. Then one finally dropped on my doormat. I was quite concerned as due to working for an American Company with a share scheme things got quite complicated. I found the best thing to do was go down to the tax office in person. The people there just wanted to sort out things as easily as possible, and weren't interested in years prior to the first return.
danhay said:
I was in a similar position until last year. Had been in the higher bracket for a while, but never filed a tax return. Then one finally dropped on my doormat. I was quite concerned as due to working for an American Company with a share scheme things got quite complicated. I found the best thing to do was go down to the tax office in person. The people there just wanted to sort out things as easily as possible, and weren't interested in years prior to the first return.
Don't do this at the IR offices at Nottingham. There is NO PROVISION WHATSOEVER FOR NON-EMPLOYEE CAR PARKING ON THE SITE. And if you park your car in our car park we'll clamp you! It's not our job to provide car parking for the Inland Revenue! As we are at present building on our former car park, we don't have enough room for my fellow employees and our customers, let alone people visiting the IR. Take it up with them.
And breathe.
You have my sympathy as I faced a similar situation not so long ago. I got some sage advice from PHers for which I will be eternally grateful.
In my case I have been a high rate tax payer for seven years but never did a tax return. I sort of knew I should but fear of them going back for years and giving me a bill I couldn't pay meant I left it.
Anyway they did a trawl thorugh my employers's records and I got a return. So I filled it in. Nothing to pay as I was pure PAYE with no saving or other investments.
THEN I got a letter asking me for the PREVIOUS FIVE YEARS' RETURNS
It came from the "Recoveries Team." To say I evacauted my bowels is an understatement.
I got all my payslips and stuff having phoned them up. The lady was very nice and sympathetic but you ABSOLUTELY MUST be polite and nice to them. They get abuse ALL DAY EVERY DAY and ifg you are nice to your case worker it makes a BIG difference.
I was in the fortunate position of having no income other than PAYE, and having nothing to hide so I was OK, but still scares you!!
As it turn out they owed ME money and I got a cheque. All late return penalties were waived so now my accounts are in order. The final laugh was when they sent a letter saying I didn't need to do tax returns any more... after I was sh1tting it for three months.
Anyway, moral of the story is
1. Face up to it and fill one in this year
2. Expect to have to account for all years not done
3. Be proactive - RING THEM and GET )ON SPEAKING TERMS WITH YOUR CASE WORKER AT THE IR. DO NOT be nasty to them This makes all the difference.
4. If you have something to hide then get an accountant NOW. They do not pursue criminal proceedings if you are OPEN AND HONEST BEFORE THEY INVESTIGATE YOU. If you are open and honest after they start you have a problem.
5. Bear in mond that if you owe money they do give you time to pay, as it is not in their interests to bankrupt you becuase then they get nothing.
Good luck and best wishes.
330CS
PS "intaxication" - defined as the joy at receiving a tax rebate only to then realise it was YOUR MONEY IN THE FIRST PLACE
>> Edited by 330Clubsport on Friday 14th January 19:12
The furthest they can go back is seven years IIRC, but as she has been paying 40% for some time and not filing a return she is missing out on getting higher rate relief on pensions etc. She can also claim for professional fees and memberships, union fees etc too.
She should probably find an accountant - ask your friends, somebody who is self employed will know a good one. My tax return is fairly simple but for historical reasons I do use an accountant and it costs about £150. Not bad seeing as I always get a rebate for more that £200.
She should probably find an accountant - ask your friends, somebody who is self employed will know a good one. My tax return is fairly simple but for historical reasons I do use an accountant and it costs about £150. Not bad seeing as I always get a rebate for more that £200.
Fear of the Inland Revenue - well justified, especially if you are a small business owner...
The taxman is linking up with Customs and Excise soon, so they'll jointly have more powers over you and your property than the police. The VatMan already does.
Then there's the even scarier Joint Shadow Economy Team which throws in the Department for Work and Pensions as well.
Nothing to fear if you've done nothing wrong? Yeah right. Like every other context this is spoken in, it's cr@p. Unless you're an accountant or simply a whizz with that stuff, the cost of working with a chartered wossname to respond satisfactorily to even a bog standard Revenue investigation is alarming. There's always something they can find if they look hard enough, usually it's peanuts, but that's not the point - just wait for your accountant's invoice
Resistance is futile. Be afraid, very afraid...
The taxman is linking up with Customs and Excise soon, so they'll jointly have more powers over you and your property than the police. The VatMan already does.
Then there's the even scarier Joint Shadow Economy Team which throws in the Department for Work and Pensions as well.
Nothing to fear if you've done nothing wrong? Yeah right. Like every other context this is spoken in, it's cr@p. Unless you're an accountant or simply a whizz with that stuff, the cost of working with a chartered wossname to respond satisfactorily to even a bog standard Revenue investigation is alarming. There's always something they can find if they look hard enough, usually it's peanuts, but that's not the point - just wait for your accountant's invoice
Resistance is futile. Be afraid, very afraid...
330Clubsport said:
Not sure I agree with turbobloke.
If you have nothing to hide they are OK.
If you have, though, you'd better get a good accountant quick and make the first approach. Going them before they come to you is the only thing which will save you.
Nah a tax investigation even on a legit business can drive them under. It can take hours to pull the information together and format it, meanwhile who's running your business?
IR can be a very nasty bunch.
330Clubsport said:Hi 330CS. I wasn't referring to the situation in the original post, just spouting off in general terms. Sorry not to have checked your profile to see if you're a business owner, but if you are, and if you'd had any of these people get their teeth into you, and if you had done nothing wrong but ended up with a huge accountasnt's bill to prove it, more than once, I don't think you'd say there was nothing to fear. I could buy a decent sportscar with the time / money it's cost me to prove I'm legit. Have to accept it, but I don't have to like it...
Not sure I agree with turbobloke.
If you have nothing to hide they are OK.
The Inland Revenue can cause you problems even when you really have done nothing wrong. Once they get into enquiry mode they can make any allegations they like and it is up to you to prove that they are wrong and you are right. If they decide, for whatever reason, that you have other souces of income you are not disclosing, you have to prove to THEM that they are making incorrect assumptions.
Proving negatives is very difficult - ask Saddam Hussein.
Proving negatives is very difficult - ask Saddam Hussein.
excellent guys, thats really helpful and much appreciated. Best thing to do is get on to them then and get it all cleared up. Shes had no other income except her salary every year so i hope it will run through as normal. Finding old receipts will be nigh on impossible but we'll take it as it comes.
Not all bad news, my tax returns this year revealed Id overpaid by £350 so a nice cheque popped through the door. Which was nice.
Thanks all!
Not all bad news, my tax returns this year revealed Id overpaid by £350 so a nice cheque popped through the door. Which was nice.
Thanks all!
Watch out for the effect of Benefits in Kind on Tax Codings. Even those who fall entirely under PAYE can come a cropper pn this score. I had one client a year or so ago who had to fork out £6,000 to the Inland Revenue. All because she failed to notice for three years that her Notices of Coding didn't reflect the fact that she had use of a company car.
Eric Mc said:
The Inland Revenue can cause you problems even when you really have done nothing wrong. Once they get into enquiry mode they can make any allegations they like and it is up to you to prove that they are wrong and you are right. If they decide, for whatever reason, that you have other souces of income you are not disclosing, you have to prove to THEM that they are making incorrect assumptions.
Proving negatives is very difficult - ask Saddam Hussein.
I remember reading a book a few years ago in which an ex tax inspector (game-keeper turned paocher) recounted cases where his clients were being hounded by the revenue, even though they were clean. It contained tales of lying, deceipt and downright dishonesty, and that was by the revenue!
A friend of mine was a self employed milkman, the IR came and spent a day looking over his books and decided that at xmas each of his customers would give him a pound tip, (600 customersin his case) and taxed him accordingly.
A self employed businessman, is a completely different game to someone on the books.
Being self employed and totally honest can keep you poor, that is why we have accountants, so we can run the gauntlet.
Mick
A self employed businessman, is a completely different game to someone on the books.
Being self employed and totally honest can keep you poor, that is why we have accountants, so we can run the gauntlet.
Mick
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