Self Assessment and Tax

[momon121]

Hi

I have a friend who’s in a dilemma, he has been claiming ESA for 3 years and during this period he has been recieving rental income from 3 of his properties that been undeclared.

He now wants to go legit but is unsure which path to take i.e. sold trader or a limited company. All the houses are worth £300k in total and he recieves rental income in excess of 1500 month.

I apologise that some maybe offended or angered at by his actions, however he is very remorseful and has gathered the courage to abide by the law and start paying his taxes from now.

Please could any accountant on this forum advise us how I can help my friend to take steps to move away and start showing legitimate earnings through his rental income.

Ps my friends expresses eternal gratitude

 

[Toby Willows]

Easy, to go legit’ “he” registers as self employed and declares his last three years earnings earnings and pays his tax and ni and any fines that are also due.

 

[momon121]

Would that not get him into trouble for withholding his last 3 years of earnings. What happens to all the ESA payments ?

 

[Scalloway]

If he transfers the property to a limited company he may have to pay capital gains tax.

 

[momon121]

What about all the ESA he has claimed would that need to be repaid back? He has no issues paying back

 

[Newchodge]

The only way to go legit is to tell the DWP and HNRC of his 'error'.

The DWP should recalculate his benefit entitlement, request repayment of all money that was overpiad and consider criminal charges. The criminal charges are less likely if he admits the deception rather than waiting for them to find out.

HMRC will recalculate his tax liability for all 3 years, request the tax due and apply any relevant penalties.

 

[Newchodge]

'rental income for 3 of his properties'? How many does he own, and did he not get asked about capital assets when he made his claim?

 

[momon121]

He owns all of the property and guessing from the application there must be declaration to sign whether or not you are reccieving any other incomes on the form ?

 

[Newchodge]

He owns all of the property and guessing from the application there must be declaration to sign whether or not you are reccieving any other incomes on the form ?

I didn't mean how many of the 3 does he own, the way you worded it it sounds like he has more than 3. It is not just income you have to declare, but assets as well.

 

[momon121]

Oh sorry he has 3 property on rent and his own house that he residen in so 4 in total.

 

[Newchodge]

3 years ago you could not claim ESA if you had assets of £16,000 or more. Your own residence is excluded.

 

[momon121]

Wow i didn’t know that, what do you guys suggest that he does ?

 

[Newchodge]

Do what I said in my first post.

 

[momon121]

Thank you so much

 

[KAC]

Most accountants know little about ESA and the mechanics of dealing with a fraudulent claim and the necessary reimbursement.. I would suggest he contacts the CAB who should know a lot about it.

He wouldn't need to register as self employed. He would need to register for self assessment. Any good accountant should be able to help him with that and submit details of his rental income to HMRC with the appropriate explanation.

Make a full disclosure as soon s possible to minimise the penalties and the risk of prosecution. When he consults an accountant they may well be required to make a suspicious activity report under the money laundering legislation,

 

[momon121]

this is one of the fears of our friend whereby we don’t want some
Hero to nab him in especially he’s making an effort to come clean and willing to pay back 100%

 

[KAC]

Nothing to do with "being a hero". It is a criminal offence not to make a report Only mentioned it because when he decides to come clean, he may not be left with an option. No negative effect from an SAR if the disclosure is actually made to DWP and HMRC.

 

[momon121]

What is an SAR

 

[KAC]

Suspicious Activity Report. Some bedtime reading here. The money from ESA would have been "criminal property" obtained by "criminal conduct"

 

[momon121]

Thank you so much KAC

 

[ethical PR]

this is one of the fears of our friend whereby we don’t want some
Hero to nab him in especially he’s making an effort to come clean and willing to pay back 100%

Not quite sure why you are making your friend out to be the good guy by suddenly deciding after three years of defrauding the benefits system out of thousands and thousands of pounds to suddenly come clean.

He would have knowingly signed a false declaration when he applied for the benefit that he wasn't in receipt of this rental income and that he didn't own these properties.

As others have mentioned his best bet is to come clean and offer to pay back the benefits in full and taxes liable. Far better than being found out and ending up with a criminal record and possible prison sentence. (Not that doing so means he will avoid prosecution but just they are likely to go much easier on him than if/when they find out).

 

[momon121]

I’m not defending him, we all have moments of weakness once in our lifetime, are you telling me the more experienced business people on this forum are as straight as an arrow?

I don’t think so, behind closed doors their accountants would advice many of their clients of loop holes that exist. Rather slam someone down is it too much to ask for some sound guidance for the best course of redemption?

Sometimes punishments are not always the answers for retribution and correctness but conscious, realisation and willingness is, this helps to recitify errors. This is by far a greater good of an act than someone who proclaims to be a saint yet he’s crooked in their ways.

 

[KAC]

I don’t think so, behind closed doors their accountants would advice many of their clients of loop holes that exist.

I would hope that the majority of accountants would advise their clients of what they believe to be legal ways of saving tax which may include loopholes.
Suppressing income and making false claims to benefits shouldn't be one of those ways.
Encourage your friend to take this chance of putting matters right before it is too late

 

[momon121]

That’s what we are trying to achieve KAC. The ball is in motion, I only put this info on here to seek advice to resolve this matter ASAP

 

[ethical PR]

I’m not defending him, we all have moments of weakness once in our lifetime, are you telling me the more experienced business people on this forum are as straight as an arrow?

I don’t think so, behind closed doors their accountants would advice many of their clients of loop holes that exist. Rather slam someone down is it too much to ask for some sound guidance for the best course of redemption?

Sometimes punishments are not always the answers for retribution and correctness but conscious, realisation and willingness is, this helps to recitify errors. This is by far a greater good of an act than someone who proclaims to be a saint yet he’s crooked in their ways.

Defrauding the benefits system (and therefore us tax-payers who pay for it) for three years and choosing not to pay tax, is hardly a moment of weakness.

There is a huge difference between being tax efficient and working within the law and deliberately breaking the law.

Yes I can hand on heart say I have never deliberately lied whilst claiming benefits to receive money I was not entitled to. And I have always declared my income for tax purposes. Do not insult me by comparing me with your friend.

Your friends has been given advice by many already on this thread. He needs to come clean voluntarily, and pay back the benefits he took that he was not entitled to and any fines due for this and unpaid tax.

Benefits are there for those who have no other way of supporting themselves. Your friend was generating thousands in income from three properties and living in a fourth. Not only did he not pay tax on this but deliberately lied and applied for benefits he wasn't entitled to.