'My Bad Decisions Will Chase My Kids All Their Life': Self-Employed Worker Faces £170K HMRC Fraud Bill

A Reddit user under HMRC investigation recently shared on the r/UKPersonalFinance subreddit that he will be found guilty of fraud and asked to repay £170,000 ($227,578) in tax debts.

As a self-employed person for the past seven to eight years, earning £70,000 annually, he shared that he received a compliance letter from the HMRC regarding large expenses he can't explain.

'I'm guilty, I'm not trying to pass responsibility. The final bill will be between 130K and 170k depending on what penalty I will get, interest will add every month probably £700-£900. I have no assets,' he wrote.

Father of two daughters, aged three and five, believes his bad decision will follow him and his kids for life.

'Being a fraud debt [sic] will never be erased. I have bad things in my mind now, I lost weight, not sleeping. I have two daughters, 3 and 5 and this is keeping me at the moment on this earth. I don't know what to do just to get few moments of peace,' he wrote on Reddit.

The Reddit user explained that his tax returns in his early working years were normal. He lost contact with his first accountant four years ago, and the new one said he had overpaid a lot in taxes in previous years. The new accountant assured him she could recover some money by declaring large expenses and ended up earning up to 20% from his tax refunds.

However, the self-employed person later described how 'stupid' he feels for not realizing that the accountant's strategy could land him in trouble.

With slim chances of setting up a payment plan, he now wonders if HMRC will bankrupt him or offer him an opportunity to work and pay around £2,000 to £3,000 per month.

'If they bankrupt me, I read that in 1 year I will need to pay monthly what is left from my salary after personal expenses like rent and bills. After this, 12 months they will still take money from my earnings for at least 3 years,' the Reddit user added.

He is working with a specialist accountant dealing with HMRC, but he believes it will cost him a lot of money without the desired results.

HMRC Rules for Those Who Cannot Afford Tax Bills

According to the HMRC website, you will be required to pay an amount towards your tax bill every month. The amount is fixed based on your monthly savings after paying rent, groceries, utility bills, and other fixed expenses.

'You'll usually be asked to pay around half of what you have left over each month towards the tax you owe,' according to HMRC.

If you miss your payments, HMRC will contact you to find out why. If possible, they will try to rearrange or renegotiate the payment plan with you. They can also ask you to agree to a 'Time to Pay' arrangement, use any overpaid tax to clear the tax owed, or even adjust your tax code to collect the outstanding debts.

However, HMRC might take a different approach in cases of suspected fraud or criminal activity, or if you fail to engage with them or refuse to pay dues. HMRC can send debt collection agents, seize possessions, issue a summary warrant or a charging order, directly debit your bank account, or initiate court proceedings to recover dues.

HMRC will only apply to the courts to make a person insolvent as a last resort. This route is taken when HMRC believes the debt is unrecoverable, you have actively tried to avoid paying the debt, or you are not being honest about your assets and net worth.

Insolvency processes include voluntary arrangements, company moratoriums, debt structuring plans, and filing for bankruptcy. A bankruptcy order can be granted if an individual has applied for their own insolvency. For an individual debtor, the insolvency practitioner appointed is called the trustee.