Are you ignoring your annual tax returns?
It can’t be good receiving numerous brown envelopes through the post each with a letter, or a demand, or a statement or a threat of legal action from Her Majesty’s Revenue & Customs. To know that you are behind with tax return submissions stretching back years and not having made any payments must be pretty unbearable. Of course, the longer you leave it the harder it becomes to deal with.
This is just the situation that a friend of a friend found himself in a few month’s ago.
My friend called me and explained his friend’s predicament and asked whether we could help. I said that of course we could and arranged to meet with both of them the next day. My friend’s friend, let’s call him Bob, had been self-employed but following some fairly significant family issues some years before had had to leave the family home and, until recently, had not had a permanent home. Letters from HM Revenue & Customs were sent to his old address and were not passed on. Penalties were being levied for the non-submission of tax returns and were really mounting up. My initial assessments were that the penalties were likely to be greater than the actual tax liabilities.
There was much work to be done, eight tax returns and computations were needed to be prepared and submitted to HMRC. We agreed to work as a team. My friend helped Bob get his paperwork in order and from this we prepared income and expenditure accounts, tax computations and the tax returns.
I told Bob that the best way of handling this was to explain to HMRC, in detail, why he had got behind and although he would have to open up some unpleasant memories if we were going to have the best opportunity of appealing against some of the penalties this needed to be a full and frank explanation. Although this must have been difficult, Bob played his part by providing a detailed summary of how he had got into this position.
We also had to have a plan for settling the historic debts as well as ensuring that current tax liabilities were kept up to date.
We prepared and submitted a full package with tax returns, tax calculations, a payment for part of the historic debt, a proposal to settle the balance and, of course, the reasons for being where we were, in Bob’s own words.
I was delighted, and dare I say it, somewhat surprised when after a few weeks the Inspector dealing with the case came back to us advising us that all penalties would be dropped.
Bob still has to settle the tax arrears as well as the interest but he can now get on with his business, which not unsurprisingly, is going from strength to strength. If you have a friend who is in a similar predicament to Bob please encourage them to deal with it. It may not be easy but the alternative really isn’t worth considering.
Article written by Steve Hale