Reply to: Investigaton

[psychocandy]

Thanks everyone, I am blown away with the amount of responses here.

I've had an accountant from day 1 who deals with all of the company accounts and our PAYE, but does not do my personal returns. He did offer, but I said I was happy to do these myself. That was around the time of the first one I did in 2010. There was genuinely no extra tax to pay for either of us that year.

I spent far too much money that first couple of years. Since then, I've essentially robbed my own company and without declaring dividends properly. My accountant kept warning me that I'd taken illegal dividends and I've been assuring him that I'd get on top of it.

It wasn't until the letters came and I was forced to look at how much I'd taken from the company account that I realised it'd be in the order of 40k each to pay and that's before any penalties.

I have been stupid and for a while now I've been far more sensible, though paying off so much this year has been really tough going. I'd like to pay every penny owed - I just hope they allow me to.

Hmmm. So you've worked its not clever doing what you did. At least you've admitted it and are trying to put it right.

Thats the thing with accountants they can advise you but end of the day its your company. Lead a horse to water and all that....

[jimbeam9]

Thanks everyone, I am blown away with the amount of responses here.

I've had an accountant from day 1 who deals with all of the company accounts and our PAYE, but does not do my personal returns. He did offer, but I said I was happy to do these myself. That was around the time of the first one I did in 2010. There was genuinely no extra tax to pay for either of us that year.

I spent far too much money that first couple of years. Since then, I've essentially robbed my own company and without declaring dividends properly. My accountant kept warning me that I'd taken illegal dividends and I've been assuring him that I'd get on top of it.

It wasn't until the letters came and I was forced to look at how much I'd taken from the company account that I realised it'd be in the order of 40k each to pay and that's before any penalties.

I have been stupid and for a while now I've been far more sensible, though paying off so much this year has been really tough going. I'd like to pay every penny owed - I just hope they allow me to.

[psychocandy]

Yes indeed. I've had a few over the years too. Usual scenario is that they don't engage an accountant at first and take out all the money from day 1, making no provision for VAT nor CT, and either underestimating the taxes or relying on future earnings to pay the tax. Then, usually engage the accountant some 2 years or more after starting when they start getting penalty notices and reminders from HMRC and Co House for late filings/payments. If late with VAT, PAYE or Accounts, there'll be the penalties to pay which also eat in to the profits and cash flow.

The downward spiral is made even worse because of either the h/r tax on the amount drawn as dividends and the 25% income tax on the overdrawn DLA, so more drawings are needed to pay the H/r tax, the CT/VAT money is spent on the 25% DLA tax, and so it goes on. Then of course, some misinformed people will have been paying themselves a large "wage" under PAYE, so causing unnecessary employers and employees NIC, which hasn't been paid either.

It can take years to rectify as you have to chip away at it to bring it all right again. You need profits to vote a dividend to start paying off the DLA, but client also needs dividends to live, so quite a slow process. Then several years of balancing repayments of the DLA, then the 9 month delay to get the 25% DLA tax refunded, etc.

Of course, we don't know the situation with the OP. We don't know if he even had an accountant at first, or the nature of the engagement with the accountant. It's a bit unfair to blame the accountant without knowing the full story. If the accountant was engaged late or only engaged for the year end accounts prep, then they'll have been on the back foot throughout. Yes, I appreciate some accountants are poor, and it could be that the OP engaged an accountant from day 1 on a full service agreement to overview everything and has indeed been negligent, but until the OP confirms, it's all speculation.

As others have said, there will be an answer to this issue. First thing is to get some proper figures as to what's owed for each tax. Second thing is for the OP to come clean with his wife. That's the hardest part. Then they need to work together and with HMRC to negotiate a solution. Yes, that may be bankruptcy and losing their house, but it may also be a matter of negotiation and paying off the debts over time. What is clear is that the OP has been over-spending. As well as working every hour to earn more, they also need to drastically cut their spending and if that means selling their home and downsizing, then it needs to be done.

Thanks for the explanation and I can see how it all adds up.

BUT IMHO there is no excuse for ignorance and stupidity. Sometimes I'm not sure its even that with a lot of people - more like greed. They see all the money coming in, stick their head in the sand, and think wow what can I spent it all on I'll worry about it later. Then whine about it years down the line when it all comes home to roost.

Very little sympathy from me for most cases like this.

[philip@wellwoodhoyle]

A bit easy to blame the accountant on this one. I have a client in a very similar situation and regardless of what we said or did, the client stuck his head in the sand and continued to do what he wanted. You can lead a horse to water but you can't make it pay the tax man.

Yes indeed. I've had a few over the years too. Usual scenario is that they don't engage an accountant at first and take out all the money from day 1, making no provision for VAT nor CT, and either underestimating the taxes or relying on future earnings to pay the tax. Then, usually engage the accountant some 2 years or more after starting when they start getting penalty notices and reminders from HMRC and Co House for late filings/payments. If late with VAT, PAYE or Accounts, there'll be the penalties to pay which also eat in to the profits and cash flow.

The downward spiral is made even worse because of either the h/r tax on the amount drawn as dividends and the 25% income tax on the overdrawn DLA, so more drawings are needed to pay the H/r tax, the CT/VAT money is spent on the 25% DLA tax, and so it goes on. Then of course, some misinformed people will have been paying themselves a large "wage" under PAYE, so causing unnecessary employers and employees NIC, which hasn't been paid either.

It can take years to rectify as you have to chip away at it to bring it all right again. You need profits to vote a dividend to start paying off the DLA, but client also needs dividends to live, so quite a slow process. Then several years of balancing repayments of the DLA, then the 9 month delay to get the 25% DLA tax refunded, etc.

Of course, we don't know the situation with the OP. We don't know if he even had an accountant at first, or the nature of the engagement with the accountant. It's a bit unfair to blame the accountant without knowing the full story. If the accountant was engaged late or only engaged for the year end accounts prep, then they'll have been on the back foot throughout. Yes, I appreciate some accountants are poor, and it could be that the OP engaged an accountant from day 1 on a full service agreement to overview everything and has indeed been negligent, but until the OP confirms, it's all speculation.

As others have said, there will be an answer to this issue. First thing is to get some proper figures as to what's owed for each tax. Second thing is for the OP to come clean with his wife. That's the hardest part. Then they need to work together and with HMRC to negotiate a solution. Yes, that may be bankruptcy and losing their house, but it may also be a matter of negotiation and paying off the debts over time. What is clear is that the OP has been over-spending. As well as working every hour to earn more, they also need to drastically cut their spending and if that means selling their home and downsizing, then it needs to be done.

[CKP Insolvency MVLs]

It may feel like it's the end of the world but it really isn't.

There have been (and will be many times thereafter) those with far worse problems who have drawn a line under them and moved forward.

It is the beginning of a new chapter. You and your wife can deal with these debts via a solution that is manageable and realistic to your circumstances.

There may be a possibility that you could go bankrupt and that your wife would come to an agreement with HMRC to settle her personal tax liabilities thus saving the house, or perhaps even repaying just a proportion of them if she has no income / assets.

Obviously I'm saying this without knowing your and your wife's full position.

[MarkT]

I've been behind with VAT and corporation tax for years and have been trying to catch up, by working day and night and every weekend. This year I managed to catch up on 86k of vat and tax and am almost fully up to date.

I was really looking forward to being up to date and legit and then came the bombshell...

HMRC sent me a letter asking for details of my last 4 self assessment returns, specifically surrounding dividend income. Whilst the first year was ok, the other 4 years (the ones asked about) aren't. I estimate I owe 40k personal tax. My wife owns 50% of the ltd co but isn't a director. House is in her name only. She will also owe 40k, she knows nothing about this.

Even with no penalty applied, the quickest I could repay this would be about 21 months (assuming 40k that I owe, plus 40k from my wife). She's not had a letter, but did recently get one asking her to do her first tax return.

I'm so sick of working these hours that I do wonder if bankruptcy is an option. I'm good to carry on for another 2 years if I can pay it all off, but right now I just don't know where to turn. I've seen a couple of tax investigation specialists on google, I don't know if my accountant would be up to the task in the same way as them.

Feels like the world is ending.

God this sounds awful, call me a moron, people often do, but how did you end up with that level of SA debt? Is it because you didn't put the returns in, or because you umderdeclared your income..? I am not one to judge at all and I hope you get this sorted out for yourself, as others have said, life is a gift, and no matter what, there is an end to everything.

[Alan @ BroomeAffinity]

A bit easy to blame the accountant on this one. I have a client in a very similar situation and regardless of what we said or did, the client stuck his head in the sand and continued to do what he wanted. You can lead a horse to water but you can't make it pay the tax man.

[MrMarkyMark]

He goes to massive pubs....

Should have claimed it all back as expenses, then there wouldn't be a problem.

[northernladuk]

And your problem with that is

He goes to massive pubs....

[MrMarkyMark]

Always the first to buy everyone in the pub a round was my brother....

And your problem with that is

[psychocandy]

Surprised no one has been harsh so far to be honest.

Sounds to me like OP has had a ton of fun with his new (back then) found wealth, and is now trying to sort it out.

Which is what happened with my dear brother. Thought he was bertie big bollacks for a few years with all this cash. Always the first to buy everyone in the pub a round was my brother....

Now hes the first to moan that big bad HMRC are making him pay back. (But not even all of then!)

[jmo21]

And sorry, not trying to be too harsh, but if you spent it all uncecessarily at the time knowing full well you should have kept it for CT/VAT then its all a bit different in my book.

Surprised no one has been harsh so far to be honest.

Sounds to me like OP has had a ton of fun with his new (back then) found wealth, and is now trying to sort it out.

[psychocandy]

OP - Not having a dig. It is what it is. But how did you get "behind" on CT and VAT exactly?

Did you just not bother doing the returns or did an accountant somewhere screw up?

What happened to all the money that should have been paid in CT and/or VAT? Appreciate that, especially if you didnt have an accountant in tow at the time, there may have been some confusion. BUT, with my accountant its all recorded every month and VAT/CT money is left alone in the account and ONLY profits are withdrawn.

After all, £130+ is a lot of money to forget you had to pay...

Not being totally unsympathetic but I've got a family member who was in the same situation. Not saying you're like this but there are people out there (like my family member) who just think stuff it, spend the money and then it comes back to bite them.

Be interested to know what camp you fall into. Even if its a cautionary tale for newbies....

And sorry, not trying to be too harsh, but if you spent it all uncecessarily at the time knowing full well you should have kept it for CT/VAT then its all a bit different in my book.

[MrMarkyMark]

FTFY

can I also suggest the more important long term stability/advice/guidance you seem to be lacking from your current, incompetent, accountant?

[Danglekt]

It sounds like a right pickle!

Sorry to hear about it - I have to agree with the other comments regarding getting some professional help in both getting on an even keel but can I also suggest the more important long term stability/advice/guidance you seem to be lacking from your current accountant?

You dont want to get to the end of the next firefight to find you have stored up another problem for yourself.