I think that you need to sit down with the client and have a serious chat with them about the commitment that they are entering into with you and that getting them out of this mess is not likely to be cheap.
If they don't have the money then walk away. I know that like myself you probably suffer from sympathising with clients and want to sort them out (no, not with a baseball bat!) but you are a business and you need to know not only that you can be paid but that the client is completely clear up fron that this will not be a cheap excercise for them.
Point out that you need to file the self assessments for them. (trust me, the client will complain when they realise that everything before they came clean does not just get forgotten as free money).
You need a UTR for the client and a 64-8 in place then speak with HMRC on the clients behalf so that its an unprompted disclosure.
Your best result (so the least likely) would be for HMRC to treat the missing years as a single missed period so you would then treat all of the income and expenditure of the rental property as a single period.
Getting that result would be a minor miracle but its the best one that you can hope for for your client as the alternatyive would be four missed self assessments... Ouch!
As I say though, there is no way past self assessment for your client so they do really need that UTR number.
Congrats on veteran status... Yes, our spies (like HMRC's) are everywhere. lol
all the best,
Shaun.
-- Edited by Shamus on Thursday 25th of July 2013 12:35:15 PM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I have a client contact me with regards rental properties.
He is employed by a company and pays tax through PAYE.
He has indicated to me that he has had a rental property for the last 4 years and not declared it to the Revenue. How do I/we go about reporting this to the Revenue??He is not Self Employed. Do I just draw up a set of accounts and write to the Revnue? I have indicated to the client that he will probably be fined, and will owe tax and interest for the last four years.
He has also indicated that he wishes to import goods and sell them on. Again, he is still employed and does not wish to go self-employed status. Is this ok? And how does he report this to the Revenue?
Atually, he pretty much is self employed, he just didn't realise it!
Quite a few people out there don't realise that owning rental properties is a business and needs to be treated as such.
HMRC will ne more lenient on him coming forwards admitting a mistake than if he needed to be promped by them to make a declaration.
Hypathetically HMRC can have a field day with people in this situation where four years self assessment returns have been missed and tax has been underdeclared but they seldom apply all of the interest penalties and surcharges that they could (as that would just bankrupt everyone that makes a mistake).
For the penalties part if they come forwards voluntarily then where its a careless error and unprompted disclosure HMRC do not have to charge anything. If they find him then the minimum that they would be allowed to charge as a penalty is 15% and maximum 30%.
If they felt that mot declaring the business was deliberate and concealed then they can go after a penalty of up to 100% of lost revenue (on top of actually bringing things up to date) and if they prompted the disclosure the minimum that they would be allowed to charge would be 50% of lost revenue on top of bringing matters up to date.
Considering that they will be pottentially be getting penalty income they may or may not chase the fines for the 4 missed self assessments.
All in all best approach is to come clean, admit the mistake and be prepared to enter the four missed self assessments then try to negotiate the follow up arguing genuine mistake (although anyone who is receiving money must surely know that HMRC will be interested in it!).
As for the side business, he seems to think that he has a choice in the matter. If it is being carried on as a trade rather than selling a couple of things from the attic on Ebay then its a trade and he is self employed.
Also of course after paying the penalties, interest and surcharges plus your fee's for sorting out four years self assessment and representing him to HMRC probably over a period of several months to get this fully resolved whether he still has enough left in his bank to buy a stamp let alone go into import / export is dubious.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
