Small Business Query

[Chasingcars]

A good friend of mine has recently had a breakdown - lots of things in his life are not great but when he off loaded everything, one thing he has said that is a problem is his business which he has had for the last 10 years and is in a bit of a mess. As a business, on the surface, it is successfull but just after the business started, he had an earlier breadown and has basically said he hasnt submitted any accounts or paid tax for the last 10 years. He said he wasnt avaoiding paying it, but at the time he was ill, and then before he knew it, it was a year gone...and a year became two and the longer he left it he doesnt know where to start. He isnt hiding from anyone, but he is worried the longer he leaves it its going to get worse. As its such a long time he doesnt know where to start and also, he oviously owes a lot of money that he may not have and is worried this may bankrupt him.
Can anyone offer any advice about where to start with this and if we contact the tax office, will he be liable for the last 10 years or could they come to an agreement? The other thing is his paperwork and admin is not great so he doesnt have that many records so not sure how it could be worked out what he owed anyway - though he does have bank statements and invoices to suppliers etc.
Any help welcome as my friend has been pretty much suicidal this last week and i would like to offer some helpful advice trying to sort this out.
Just to add its a small company, only one other employee as of recently so its not like he has to pay lots of staff wages etc.

[andy-hughes]

I'd make a good accountant my first stop - get some advice, and then go from there.

[chrissa1]

Is his business registered at Companies House? I'm guessing, not. Unless he has been making mega profits, he shouldn't worry too much.

I would go and see an accountant. Sooner rather than later.

[Chasingcars]

Yes I had suggested a good accountant. I think he just wants to know what the worse case scenario may be. The company isn't registered at companies hOuse, not sure how it has gone unnoticed for so long. I don't think he turns over mega money but he just wants to put everything right and move forward. Guess he has just been too scared to ask for help.

[Peter Pedant]

defo accountant
probably tax accountant
he will ask him to prepare accounts for each trading year
and the tax payer ( ha!) can tell him how he managed to keep below the tax radar for ten years.

then the tax accountant can negotiate with the tax man ( doing it yourself without accounts or foo Mrs Mopp darn the road is doomed needless to say)
which will be tax unpaid for each year and then pains and penalties which should not exceed the unpaid sum. however more modernly he has triggered quite a few fixed penalties ( not submitting tax forms is £100 every six months innit ?)

there is a six year rule but I wouldnt be surprised if he has done enough ( that would be not done enough...) to scrap the 6 y rule and allow the tax man to go back to the year dot

PS the taxman doesnt have much of a sense of humour

[Peter Pedant]

o worst case
the unsmiling tax man deems it as tax fraud and takes out a prosecution
fraud or cheating the public revenue
see here
https://www.sentencingcouncil.org.uk/wp-content/uploads/Fraud_bribery_and_money_laundering_offences_-_Definitive_guideline.pdf

and he is category 7 ( piffling ) fine and community order

[ummmm]

Tell him not to worry for starters.

Get what little info he has an put it into excel. Use his bank statements to do this so you have all incoming and all outgoing listed, and filed. Then employ an accountant.

[Prudie]

As someone who has been overwhelmed and terrified of paperwork in the past I can sympathise. Quite frankly I'd take the the advice of the last paragraph of geojayne's last post and start afresh. Any professional involvement like an accountant is going to rake up a lot unpaid dues and will stress him out even more.

[Chasingcars]

Thanks Ummmm, but he is so worried. He is convinced anything he owes will bankrupt him and finish him for good.
Whilst he could start the company officially this year, he wants to put things right and pay for what he owes. He never intended things to get this far, just the longer he left them harder it was.
We have a number for a good accountant now and meeting hopefully in next couple weeks. From initial contact with the accountant this situation appears to be more common than we thought, not that it makes it right.
Even if he did register company now think he would always be wondering if things would eventually catch up. He wants to do what's right.
If the amount owed though can't be paid,would he have to go bankrupt or would it not better for him to carry on working and put payment plan in place, would that be an option?

[Peter Pedant]

// If the amount owed though can't be paid,would he have to go bankrupt or would it not better for him to carry on working and put payment plan in place, would that be an option?//

that is in the gift of the tax man - we dont know enough of his affairs - but I know about er owing tax. They are allowed to demand it on the nail.

and stay with the accountant who says he sees lots of it
I was reflecting earlier on today to myself about how anyone can not pay tax fo ten years and let it run .... and not at any time think 'oo er there is something wrong'
expect to find out details you dont now know
[ like he want to make it OK about his tax affairs from a sense of decency and honesty and also from having had a letter from the tax man saying they are onto him !]

[Tuvok]

I thought there was turnover limit before you have to pay VAT.

Then I think there is also the chance to claim VAT back on equipment purchased for the business.

Defiantely see an Accountant.

[Prudie]

there is, 83K I think for self-employed but this is about income tax rather than VAT I assume.

[Chasingcars]

Will be both income tax and vat.
And yes hard I know to believe that he has let this drift on - as I mentioned he has suffered a couple of breakdowns and just never got straight. A year turned into two, two to three and so on. The longer this went on the harder it has for him to ask for help.

[Chasingcars]

Hi Lukelonergan, I think some other messages have been removed before your last comment so not sure I'm following everything here?

[Chasingcars]

Just to add, he will also be behind on vat and I understand owing vat is worse than owing tax? What's the threshold for paying VAT? And again if he owes so much could he made bankrupt if he can't pay in one go?