As a sole trader, all seemed fine for our client until he wanted to buy a house and his mortgage company asked to see his tax summaries, which he did not have. When he approached HMRC to request his tax summaries, they advised him that he had estimated tax obligations through unfiled tax returns going back five years.
This client had been told by an accountant that he didn’t need to do self-assessments as he was under the standard allowance threshold. As a direct result, he subsequently stopped working with an accountant and no self-assessment returns were completed. In the five years he didn’t use an accountant he had also moved house so was not receiving letters sent to him by HMRC asking him to submit self-assessment returns. He worked under the construction industry scheme (CIS) and taxes were collected by the people he worked for. This often results in Construction Industry Scheme workers paying too much tax, so the advice to not complete returns put our client at a disadvantage.
HMRC quite rightly advise clients that they don’t need to do a self-assessment when they are under the threshold, however, there is a proviso that if their circumstances change, then a self-assessment does need to be completed. People quite innocently don’t always understand the significance of that guidance. This client thought that he was paying tax and that his circumstances hadn’t really changed. However, the CIS scheme highlighted to HMRC that my client was earning enough to pay tax and therefore requests for self-assessments were issued. In his fear of the authorities he did not realise that if he had used the advice of an accountant he might have received some money back.
The fines together with the estimates amounted to six figure sums and he was frightened that this would take all the deposit he had saved for his new home. He was recommended to us from another client and when he came to see us at Parallax we sorted out his unfiled tax returns as a matter of urgency. He received tax refunds for some years as tax had been collected from him paid on his behalf.
We were able to assist him in securing his mortgage and he moved into his new property within six months of our first meeting.