Ok looking for some advice. Maybe I should not be asking this. How do you pay yourself. I have jobs were the money goes into a separate bank account. Do you pay yourself so much and not declare on some jobs. But pay yourself enough to pay tax and NI ?
The thing is hmrc are not stupid and if you're the only plumber in your area earning half of everyone else it could flag you up for investigation.
Why even consider not declaring everything. 1 investigation will cost more in time, aggro, money and inconvenience than what you earnt is worth. Stay true, and if you ever get asked a question you wont have sleepless nights, and hmrc cant prove anything.
As a retired chartered accountant who has dealt with tax investigations I could not agree with this post more. I am not up to date with rules but I doubt that they have softened over the years. Once they have proved that you have fiddled tax you could end up paying 300% of the tax evaded made up of the tax evaded (and this is what they say you have evaded which might be more than you have actually evaded !) penalties which can amount to 100% of the tax evaded and interest that can go back to when you started trading without time limit. If you cannot pay this a suicide pill might be an easier option. That said people are doing jobs for cash and possibly evading Income Tax and especially VAT every day. It only takes one disgruntled customer to shop them to start an investigation. I believe Revenue and Customs are understaffed so your name could be on a to-do list for a few years before you know anything about it.
I used to be a test pilot for Airfix, self employed too. I always made sure everything was done legally. I used to pay myself with a new kit every month.
I do it all through one standard bank account. Which shows payments from customers and materials bought from suppliers. I tried to do a business account, but as I don't do that much I was always needing money from it, and ended up having to work on two accounts for yearly tax returns. So unless you can be sure of a steady and large profit stick to one account. If you do agency work or employ someone as a subcontractor the tax returns have procedures to follow to account for it. Usually I do it online in about a day. Download all my bank data and cut out all my private use and work the tax return from the business data. I forgot one year and got fined. One year I was broke and couldn't pay a balancing payment. I phoned them up and said I hadn't had any work and we came to an arrangement. They worked out a discount which would have been rebated at a later date, but brought it forward and I paid that. So they are helpful if they understand your situation. As I have been doing the same thing for about 15 years, my overall costs and earnings are fairly similar each year. So I follow my instincts and spend sensibly. I had a bit more work last year so ended up with about 1000 more than normal in tax.
The other thing that people forget about is that HMRC have profiles of what particular roles earn, so they know that a plumber in London will be earning X and a plumber in Yorkshire will be earning Y etc. If your income, expenses and returns don't match that profile then you pop up on their radar to ask questions why your earnings are different. And of course they can go back many,many years if they sense fraud. The other thing that is increasingly being used is to tie up property, vehicles and cars. If you live in a very expensive, house, drive a flash car and have a low declared income. You will pop up on their radar as well. The problem for the average Joe Public is that all these are automated and with the drive to stamp out money laundering, terrorism etc. they will get more sophisticated. However, at the moment as you say people resources are limited but successive governments have pledged to clamp down on avoidance. The Uber ruling hasn't helped and soon IR35 and S660 will be enforced even more rigidly, so being truly self employed or having a family business is going to get really tough
Yes HMRC like Airfix in reverse - will take you apart bit by bit, leave you in pieces with your head spinning and felling sick and then regretting what you have spent your money on
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