The more “in arrears” someone’s tax and VAT affairs are, the more serious the whole matter is. 

HMRC view a potential recovery on their part of £50,000 or more in taxes, interest and penalties, as serious. 

“In arrears” encompasses both filing of tax/VAT returns, and/or failure to pay liabilities. Initially, quarterly VAT returns may fall into arrears, which inevitably results in annual accounts and personal self-assessment tax returns falling behind. 

A house move or previous bankruptcy may mean that contact with HMRC is lost which leads to further distancing from HMRC. The years pass, and in the proverbial “blink of an eye” …5 or 10 more years are gone….. sometimes more.

There is a possible solution, but it involves coming forward, and telling the truth, the whole truth, and nothing but the truth, by way of an unprompted voluntary disclosure to HMRC.  

In relation to this disclosure, no one (including financial advisers / IFAs), are their own best clients. 

Dealing with serious historic tax and/or VAT issues is completely different to rectifying recent arrears. Experienced tax specialists need to be engaged to carry out the disclosure to HMRC together with all pre/post investigative work and related reporting.

In our experience it is the misplaced combination of fear and shame. 

Financial Advisers / IFAs have shared with us that they manage and resolve serious problems for their clients, and that failure to deal with their own financial, tax and/or VAT affairs is something that they bury deeply in their subconscious. 

Unquestionably, this affects the mental health of many financial advisers / IFAs. Some develop a sense of paranoia wondering who knows what and imagining various scenarios. This, in part, fuels the fear of HMRC’s reaction, and more so in instances where they may have been previously adjudged bankrupt.

Between January 1998 and October 2023 over 500 financial advisers / IFAs were adjudged bankrupt in the UK.

Considering that the UK financial advisers / IFAs population currently stands at just over 37,000, notwithstanding entrants to, and leavers from, the profession, this is a very sobering statistic i.e. – 1 in every 70 financial advisers / IFAs made bankrupt.

The petitioning creditor almost all cases is HMRC. Out of all the financial advisers / IFAs bankruptcy orders issued between January 1998 and October 2023, almost 56% were issued in the 10 year period between June 2005 and June 2015.

Whilst financial advisers / IFAs can continue practising post-bankruptcy, we know that the effect of bankruptcy on their lives, and those of their families, can be crushing, and for most, life changing.

From the initial interaction with the Official Receiver and/or Trustee in Bankruptcy thereafter through to discharge and beyond, a pervasive roller coaster is in motion, the impact of which takes many years to grind to a halt.

The experience is all-consuming and invades health, personal relationships, children’s lives, family homes, transport options, interaction with colleagues, banking arrangement, and very often the neglect of post-bankruptcy tax and/or VAT affairs, sometimes for many years.

Ultimately, “head above the parapet syndrome” emerges, and a combination of the events described above prevent most financial advisers / IFAs from progressing commercially. The consequence is that commercial opportunities are lost which compounds matters.