will i be done for tax invasion?

Question

i decided to leave my job september 05 and try setting up my own business. Within that year i made 33 k but did not pay any tax out of this i paid for all new computer etc and needed a care to travel so had to keep the car maintained and also travelled long distances so really i did not solely profit 33k. It did not work out and i went back to my old job sep 06. The inland revenue have asked me to complete a self assessment form. What will happen now and how much will i have to pay them.

Answer 1

HAHA! Tax EVASION!!

I assume you mean £33k was your income from sales?

You need to work out allowable expenses, such as car costs, computer expenses, goods purchased for sale, telephone, also if you used a room in your house as an office you can claim a percentage of home running costs. Once these and other allowable expenses are deducted your profit will be reduced.

My advice to you would be to contact a local accountant (their charges will be deductable as well), speak to them and you can have accounts made up for the year to September 2006.

The trading profit will go on your tax return for the year to 5 April 2007 (due 31 Jan 08) alongside your employment income.

Depending what your employment & other income is, you could be liable to income tax of up to 40% on your trading profit.

There should not be any extra charges because your trading year ended within the current tax year, ie no tax evasion AS LONG AS you work your profit out (with an accountant would be easier) and declare it on the tax return this year.

Hope this helps.

Answer 2

Were you self employed or did you setup your own company? Who owned the car? You personally, or the company (if you set one up)? Either way there are tax impliactions - you can't simply claim the cost of running the car as an expense since no doubt you also used it for personal use.

Hard to tell without knowing more details, but there's a very high chance you owe tax. Its seems very very unlikely that you have £33k of "allowable" expenses to offset against your income.

As long as you accurately fill in the self assessment and then pay up what is due, you'll be fine. If you don't come clean then you're in for a tough ride...

Answer 3

You will be taxed. You can only claim the travel if you can prove it was all done on behalf of your business and that you did not do any personal motoring. Your computers are assets and whilst you may get a capital allowance, it is unlikely that you will be able to claim the whole costs against the business as 'expenditure'

Quick Profit & Loss a/c

Sales (turnover) £
Less
The cost of your sales (costs directly attributed to the sales of your business eg.... purchases for resale) (£)

Gross Profit = sales less cost of sales £

Gross profit Less

Expenditure (not attributed to generating a cost towards your sales):
Wages & Salaries paid
Rent Rates Light & Heat
Office & Telephone expenses
Travel Expenses
Other costs

Net Profit = taxable (subject to the Revenues agreement)

Answer 4

It doesn't sound as though they think you've been evading your taxes, so I wouldn't worry about criminal proceedings or anything like that. The Revenue have much bigger fish to fry.

But if you owe them tax then you will have to pay it, and you will also have to pay interest because you have missed the deadline for payment. If you count that as being "done", then yeah, you will be.

The first thing you need to take note of is that the tax year in the UK runs from 6th April to 5th April, so even though you only traded for a year you will have been trading for two tax years. Roughly half of your trading profit will go on your 2006 tax return, the other half on your 2007 tax return (not due for ages yet).

The second thing you need to know is that you can only have tax deductions for expenses if you can prove you incurred them. So I hope you kept a mileage log, receipts etc.

I would advise you collect everything up - and your P45 from your old job - stick it in a carrier bag and take it down to your local accountants. Show them what you have in terms of records, and ask them how much it would cost for them to turn it into a set of accounts and two tax returns (one now, one next year). It will be a LOT less hassle than trying to do it yourself especially if you are the type of person who worries about things.

Also ask them about National Insurance contributions. It may turn out that you should have been paying them as well. Depending on your salary from your other jobs you may be able to claim exemption, but it doesn't happen all by itself - you will need to fill in a form.

Finally, you may be tempted to hide a few invoices to lower your tax bill, especially since it sounds like you don't think it's fair that you should be taxed on this income. My advice would be not to risk it. You don't say how the Revenue came to be sending you a Tax Return, but if you haven't said anything to them then they got the information from somewhere. It will be more trouble than it's worth to try to save a few hundred quid by lying about how many people you worked for or how much you were paid.

Which reminds me, if you only worked for one person the Revenue may argue that you weren't really in business on your own but were actually an employee. That can get complicated, and you will definitely need an accountant!

Answer 5

you will be charged because, you have to pay the tax on the profit and then use it for what you have done, unless as an accountant i know... u look over your accounts and check how you have recorded the transactions regarding profit, this way the inland revenue can not touch you for tax invasion.

Answer 6

SWimply tell them that you were not working, simple, then pay no tax. Whatever Country you come from, be it the UK or USA, they will just piss it away in Iraq anyway.

Answer 7

You may owe the IRS a lot of money. Ask a good accountant for advice in reducing your liability.

Answer 8

well your sunk. if you would have filed properly you coulda had a few write offs. hire an accountant & hope 4 the best.

Answer 9

tax invasion?

sounds exciting - aslong as you don't take hostages?

Answer 10

isn't it tax evasion?