Reply to: Which one of you is it?

[tractor]

My accountant warned me that closing the company has no use anymore because HMRC have the power to link previous companies and re open them if they find your current company has issues.

He also pointed out that closing the company will also get you unwanted attention so basically you are screwed either way.

Also when I first opened my company it was visited by a Vat inspector before I got a vat number...

For the record she was really nice and very helpful.

and all the better if you can keep below the VAT threshold and not register for VAT, because a few months after starting a new company one inevitably has a VAT inspection, and now the inspectors demand to see your last two or three contracts, no doubt to see if you're likely to be caught by IR35!

This is not true for everyone. Maybe there are local variations. I know someone who over 25 years had 8 companies (see the csa thread), only ever 1 compliance visit before taxman was velcroed to the vatman, no vat compliance visits and no nothing else either!

[centurian]

Well, I don't buy such story. Either not all material facts are told or it's total BS.

Yeah, something doesn't quite add up. HMRC may not be the sharpest tools in the box, but you don't get a demand for 200K from just having a few missing invoices and petrol receipts.

[AtW]

he believed that the truth would set him free, He didn't owe the money and could prove it however personally having experienced the stupidity inherent in the justice system he was naive.

Well, I don't buy such story. Either not all material facts are told or it's total BS.

[Wanderer]

Not invoicing one of his clients, so did the client pay? Or did he neglect to pay the CT on it? If it was £200K's worth of CT he hadn't paid, then that would have been a £million invoice he forgot to send.

He admits that he omitted to write up a few invoices. So how much were the invoices for then? How was he paid the money that caused his accountant/bookkeeper to miss that income? Must have been quite a lot if he got a massive bill. He also said it cost him £50k to sort it all out, how much of a mess were his accounts in then? There's a lot more to this than meets the tearful eye.

The poor chap does sound like he's had a bit of a breakdown but HMRC can't let someone off the hook just because they start crying when they get caught running their business a bit fast and loose....

[vetran]

So where did he get £200k to cover those losses? He had to have money to stay solvent.

And if he could afford to sustain such losses, why could not he afford to get a good lawyer?

probably :

remortgaged the house.

he believed that the truth would set him free, He didn't owe the money and could prove it
however personally having experienced the stupidity inherent in the justice system he was naive.

[OwlHoot]

It's one reason my accountant advises his contractors to change companies every 3-4 years, as it means you're less likely to pop a flag.

and all the better if you can keep below the VAT threshold and not register for VAT, because a few months after starting a new company one inevitably has a VAT inspection, and now the inspectors demand to see your last two or three contracts, no doubt to see if you're likely to be caught by IR35!

[AtW]

Stupidly, brother in-law was losing money on his shop for ten years in the hope that he could eventually make a profit and sell it. Despite loses of over £200,000

So where did he get £200k to cover those losses? He had to have money to stay solvent.

And if he could afford to sustain such losses, why could not he afford to get a good lawyer?

[bobspud]

My accountant warned me that closing the company has no use anymore because HMRC have the power to link previous companies and re open them if they find your current company has issues.

He also pointed out that closing the company will also get you unwanted attention so basically you are screwed either way.

Also when I first opened my company it was visited by a Vat inspector before I got a vat number...

For the record she was really nice and very helpful.

[sasguru]

Makes you almost want to go umbrella just to avoid the tulip Almost but not quite.

[cojak]

Thirty odd years ago when I was self employed the business failed. I did not claim any benefits. Six months later I started up again and I received a tax bill for the time not working. The Inland Revenue said it was payable because if I was not working, I should have claimed benefits. I had to pay up.

Stupidly, brother in-law was losing money on his shop for ten years in the hope that he could eventually make a profit and sell it. Despite loses of over £200,000 and audited accounts, the Inland Revenue estimated his “profits” and took him to Court. He will be paying the Inland Revenue for the rest of his life for money he never owed. He refuses to go bankrupt (silly bugger)

Bloody Hell, really??

I never realised that aspect of the tax system! I wouldn't have claimed either unless I was flat broke!

[Old Hack]

But surely changing companies every few years is a flag in itself? The best thing to do is use a good accountant and follow their advice.

I have, and I do.

[Old Hack]

How do you know if they are a good accountant? Perhaps changing companies every few years is good advice!?

I am not too sure they have a flag on how often you change companies, I am on my 6th now. Logically, it makes sense to me. Also, there's a statute on how long they cna look back over your books, and I also guess it limits how many years trading they can investigate in one company. Once it has folded, it has folded.

[MyUserName]

But surely changing companies every few years is a flag in itself? The best thing to do is use a good accountant and follow their advice.

How do you know if they are a good accountant? Perhaps changing companies every few years is good advice!?

[proggy]

I have also been told of 'flags' Hector has on your business. If you make a certain profit, and swing in between variables over the years, then they rarely notice you, but if one year, you make too much profit, or less than before (lower than the flags), then that too raises an investigation. It's one reason my accountant advises his contractors to change companies every 3-4 years, as it means you're less likely to pop a flag.

But surely changing companies every few years is a flag in itself? The best thing to do is use a good accountant and follow their advice.

[Old Hack]

I'm guessing that HMRC said we don't believe your accounts, for your kind of business this is the kind of profit we would expect you to make, now pay us the tax on the profit we imagine you made. They can issue any bill they like, then it's up to you to prove you don't owe it.

My plumber told me a similar story about a guy he knew. He chose a classification code for his business that while reasonable put him in the company of of a majority of people with a very different kind of business. So when HMRC saw that his profits were not the same, they simply billed him for what they thought his profits should be, and told him he would go to jail if he didn't pay. (He went to plumbers accountant, who kept telling HMRC to feck-off, and every time he did, HMRC would send another bill half the size of the previous one, till eventually they were demanding bugger-all.)

I have also been told of 'flags' Hector has on your business. If you make a certain profit, and swing in between variables over the years, then they rarely notice you, but if one year, you make too much profit, or less than before (lower than the flags), then that too raises an investigation. It's one reason my accountant advises his contractors to change companies every 3-4 years, as it means you're less likely to pop a flag.