Tax nightmare!

[hardius]

Hi everyone,

I'm new here, so not completely sure how this'll work, but here goes...

I started a business with my partner 6 months ago - we sell web design, and have ran up an income tax bill of around £13,000, which is due pretty much straight away.

We had a hard Xmas period, but things have picked up massively in the last month - soomething we expect to continue, however we can not afford to pay this bill yet.

We're new to business, and are still learning, so our experience with tax collectors is virtually non-existant. We spoke to the tax office and asked for an extension or repayment period - they were very surly and abrupt on the phone (something which was surprising at the time, although thinking on it we're not surprised anymore). They said they could not extend the repayment period past the current tax period (i.e. until April) - we were hoping to have longer to pay as this is a large bill.

So I have a few questions :

Is it true that they can't extend payment periods past April? I'm completely unsure on this one, it sounds like it could be true, but then again they might just be pressing to get the money in...

If it isn't true, is there any jargon I can use to press for a larger time period?

If it is true, any suggestions?

I'm worried about this - so any help would be a big bonus!

Many thanks,
Hardius

[Alpha]

Currently you do not have a problem......yet!!!

The tax year for sole traders/partnerships runs from 6th April to 5th April the following year and no it NEVER changes.

As you started your business 6 months ago you will for tax purposes draw up your self assessment figures from the date you started until 06/04/06 (or 31/03/06 if you want this to be your accounts year end).

The tax on your profits for this period will be payable by 31/01/2007 (as well as 50% of the figure towards your 2006-7 tax bill with the second 50% payable by 30/07/07).

As a note if you think that you and your partner owe around £13000 to the taxman it would put your turnover at £70000 in the last 6 months even if you had no costs to go against it (this means that you should also be VAT registered)

It sounds to me as if you really do need to go and see an accountant.

Make an appointment to see someone local or even ask someone of these forums such as Joyous. It will save you a lot of unneccessary worry and probably some tax as well :D

[bwglaw]

The granting of an extension is at the discretion of the HMRC. If you have a tax bill of £13,000 you should have generated sufficient income to at least make substantial and regular payments.

The best person to speak to is your Accountant who would be able to negotiate on your behalf in order to avoid further action for recovery.

[dcaccounting]

You say you started trading 6 months ago. So did you start trading in June?

If that is that case dont worry yourself too much as yet about TAX because your trading profits wont be assessable until 05 April 06 and the payment for which is due on 31 January 2007.

How have you estimated a £13,000 tax bill? Has a professional told you that?

If that is the case you will, like Alpha said have to pay 50% of that liability as a payment on account for tax period 2006/07.

If all the above is correct I would compile accounts to the 31 March and set that as your year end that way you'll avoid "overlap" and seriously consider incorporating you business to a Ltd company.

Regards

Dean

[autolycus]

Hardius,

On a slightly different, but related, note - did you remember to register with HMRC as self-employed within three months of the end of the month when you began trading?

You said your knowledge of tax matters was limited, so I just wondered...

Dave.

[Jayne]

This happened to us the very first year of trading, this is why I stress to everyone who asked, get a good accountant as soon as you start in biz.

Tax man wouldn't budge with us or give us an extension, we had to get a bank loan to pay the Tax man off. I think the Tax office has a mean dept' especially for people who cannot pay :lol:

Jayne :D

[dcaccounting]

Hardius,

On a slightly different, but related, note - did you remember to register with HMRC as self-employed within three months of the end of the month when you began trading?

You said your knowledge of tax matters was limited, so I just wondered...

Dave.

Good point!!!

If not I see some fines coming your way. <£1000.00

Regards

Dean