HMRC Self Employed Late Registration Penalty

[robbieboy29]

Bit of a long shot really, I just wondered if anyone knows of any reasons that are justifiable to Customs and Excise for late registration as self employed?

I was made redundant December 09 and was subsequently unemployed for six months. I then won a contract working self employed starting work July 09. I have only realised now that I should have registered within three months of having started. I presumed that everything would be officially attended to when I submitted a tax return at the end of the year. I also stupidly thought that informing the benefits agency that I was signing off to become self employed was adequate.

I called the revenue for advice and was told that not knowing was not an acceptable reason for the delay and that I would most probably be fined £100 for being four weeks late registering. The fine seems a bit steep considering the NI payments are only £2.40 per week approximately £50 in total. If it was a percentage penalty I think I would understand and swallow the charge. It does make you not to want to bother registering and simply become a member of the hidden market place.

Your comments would be greatly appreciated.

[hendyphilhendy]

Unfortunately there is little mitigation here. As you have stated, not knowing is not a reasonable excuse.

Did you speak to anyone to obtain any advice about going self employed? A quick call to HMRC or a discussion with an accountant and they would have told you.

Anyone who runs their own business has responsibilities and it is up that person to act appropriately to fulfil them!

[Tom Egerton]

I'm not sure you received the correct advice from HMRC. The 3 month rule has been around for a very long time. However, my understanding is that from 6 April 2009 you need to inform them by 31 January following the end of the tax year in which you became liable (to class 2 national insurance contributions). In your case, this will be 31 January 2011.

You will still be liable for contributions from the date that you actually started self-employment.

[robbieboy29]

Hi Tom,
That's exactly what I was thinking. I was not trying to avoid my responsibilities, simply got my wires crossed. I will certainly make enquiries along the lines of your comment and will let you know how I get on.
Thanks.

[robbieboy29]

Hi Phil,
We are all talented in different ways, unfortunately I am not an accountant.

In many other forums that I have read most people put off speaking to the tax authorities until they have to and suffer a similar fate. I have learned a very expensive lesson, but what a way to support fledgling business, especially now.

As I said, I presumed that everything would be officially attended to when I submitted a tax return at the end of the year. I also stupidly thought that informing the benefits agency that I was signing off to become self employed was adequate.

Thank you for your comments and I can assure you that I am trying to do the right thing. Pity the Revenue are so rigid from the start.

[hendyphilhendy]

The odd thing is though HMRC are not unapproachable and this advice can be found very simply on their website.

Anyone who starts in business should speak to an adviser and ask the question. How are the Revenue to know to send you a tax return if you don't tell them?

I take it you are looking at these forums now rather than having researched them at the time.

I am not trying to pick an argument, merely forewarning others of the need to get advice when setting up in business!

[David Griffiths]

I'm not aware of any changes to the three month rule, and the guidance currently on the Revenue website still shows three months, not 31 January.

I have to say that in practice I've never actually known them impose this penalty, but all the late cases that I've come across have still told HMRC in time to get the tax return in by the normal due date. Just sit tight and you may well find that you don't get penalised. (Of course knowing your luck . . . . . . etc etc :D )

There is a get out clause if you don't have to pay the NIC because your earnings are less than the exception threshold (£5,075 this year) but I'd guess that you will have exceeded that?

[RAL]

[quote=David Griffiths;1057794]I'm not aware of any changes to the three month rule, and the guidance currently on the Revenue website still shows three months, not 31 January.
[quote]

This penalty will be abolished from 01/04/2010 and it will be repalced with a new behaviour based tax geared penalty. (Finance act 2008, S123 and Sch41, SI2009/511, arts 2 and 3)

[David Griffiths]

[quote=David Griffiths;1057794]I'm not aware of any changes to the three month rule, and the guidance currently on the Revenue website still shows three months, not 31 January.
[quote]

This penalty will be abolished from 01/04/2010 and it will be repalced with a new behaviour based tax geared penalty. (Finance act 2008, S123 and Sch41, SI2009/511, arts 2 and 3)

So from next year not this year. I'll worry about that when it becomes fact! Thanks for the link.

[robbieboy29]

Thank you David for your comforting post.
I will of course get my tax return in and paid in time and if I had got the appropriate advice earlier, as Phil mentioned, I would also have ensured that I had registered as self employed within the three months rule.
Guess I will just have to wait and see what the revenue do, it's not the end of the world, just a little frustrating.
Yes my earnings have exceeded the threshold.

[robbieboy29]

Thanks for your comment Ral, changes possibly too late for me....

Too late!!! Is a pattern developing....