How far must I go back?

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JodieR
JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
I've got a client here who purchased properties in 2002, 2007 and 2008 with her husband who unfortunately passed away a few months ago. It was only while she was sorting out his affairs that she realised that the rental income had never been declared on either of their tax returns so she now wants to 'come clean' and pay the tax.
I phoned HMRC to ask how they wanted the information and they said to just send in a letter with all the details but does anyone know how many years HMRC will go back? will it just be to 2006/07? or all the way to 2001/02?

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  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    I think a recent tribunal or appeal ruled that they can go back further. I would assume they could go back to 2001-2002 because they are owed tax, presumably. I'm not sure 100% though.
  • jamesm96
    jamesm96 Registered Posts: 523
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    Monsoon wrote: »
    I think a recent tribunal or appeal ruled that they can go back further. I would assume they could go back to 2001-2002 because they are owed tax, presumably. I'm not sure 100% though.

    Yeah that's my understanding too. HMRC have the power to go back as far as they like if there's evidence of fraud or evasion.

    We have a client in a similar situation, we wrote to HMRC and explained the situation, were assigned a contact to liaise with and we got the whole thing sorted with minimal (if any, as I recall) penalties.

    I would say that if she's wanting to come clean, unfortunate though her circumstances are, she needs to declare the whole lot, otherwise she's not fully coming clean!
  • JodieR
    JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
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    Thanks - I did find someone on accountingweb who'd had a client in a very similar circumstance (but going back to 1997!). I sent him a PM asking what happened in the end, and he replied that he wrote to HMRC enclosing calculations of tax due and interest and a cheque from the client for the total amount, and the only response from HMRC was a statement showing a small overpayment, so hopefully my client will get the same treatment.
    To be honest in the first 3-4 years there was only one property being rented, it didn't make much money, and the late husband's income was still within the basic rate band back then, so it didn't make much difference to the total due going back to 2001/02.
    Fingers Crossed!!
  • JodieR
    JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
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    Just a quick update on this:

    I sent off printouts of spreadsheets calculating the tax due going back to when the properties were purchased and my client attached cheques to cover the extra liabilities plus interest (it came to approx £3k due in total)

    Got a reply from HMRC today and they have pretty much agreed to everything I said - their calculations come out at £35 more than mine which I'm not going to argue with (client is due a refund for 2010/11 anyway so it'll just be taken off that) - I'm just so relieved that they've not charged any penalties or surcharges and actually replied very promptly and clearly.

    :D
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    Great result, nice work Jodie :)
  • mahdi87
    mahdi87 Registered Posts: 121 Dedicated contributor 🦉
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    Hi there,

    I got a client with similar situation but his old accountant never submitted his tax return (only done his VAT) my client didn’t know about it at all he thought everything was done and square with HMRC to the day he ceased trading (he was sole trader). His tax bills were estimated and are at 9.5k!!! (Mostly interest & pens)
    He got me VT file which had all the working done in from his old accountant and want me to sort it out tax return haven’t been submitted since 2000-01 tax return until he ceased in Jan 2004.
    What can be done? Should I just send the trial balance to HMRC?
    I.e. I sort out the 1st year ending 31/5/2000 and the net profit was around 3.5K can which I believe is under the personal allowance for that tax year but HMRC estimated the tax for that year at £700.

    The question if I submit it to them by letter would they get suspicious and ask for invoices which we don’t have!! As his old accountants got rid of them based on the 7 years rule of keeping information.
    He told he might have the bank statements though.

    Any ideas guys?
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