I've been approached by a potential client, an unicorporated partnership who have a craft business selling jewellery on Etsy.
They've been trading since 2015 but didn't realise they needed to register for self assessment. They only got in touch with me because they are trying to grow their business and thought they might need to register for tax soon! The business had been reinvesting profits into their business and didn't realise that profits constituted income. Alarm bells were ringing as soon as I spoke to them and I explained that they needed to register for SA as soon as possible - they've emailed me to say they've done so. They also need to register their partnership, and from the information I've gleaned, they need to file tax returns for 2015/16 and 2016/17 to get up to date.
I see this as a misunderstanding by the business about the tax system, but even so, they need to get this right promptly.
1) Does anybody have experience of this situation where a client failed to register for SA in time? Can anybody advise as to what penalty they are likely to face for the 2015/16 return?
2) Am I going to get myself into any difficulty (reputation-wise or otherwise) for taking on such a client?
3) And, is there any obligation on me to report them to HMRC?
Many thanks, Zoe