UK Non Profit (infact Loss Making) Sole Trader Self Assessment

[Pratik Bhonsle]

Background:
I assist a few local charities in Scotland with their IT needs. A part of which is building and hosting their websites. For hosting these sites, I purchase an annual reseller package so that the costs can be kept to a minimum. The intent was to then individually invoice these charities their fair share and break even. For this purpose of invoicing I registered as a Sole Trader in 2009, and have been filing taxes via self assessment. I used to even pay additional National Insurance but due to another helpful accountant recently, I found that I could file for exemption.

Problem:
I haven't gotten around to invoicing them yet, so all the payments are out of my pocket.

Trivia:
The annual expenditure for things that I have to purchase as stock is never more than £500. This is in addition to any time I spend on it as I am considering that as voluntary. I operate this sole trade out of my living room, say 3 evenings a week. I have a regular office based day job as my main one.

Question:

1. Do I really need to complete a self assessment?
2. Is there a way to mitigate my losses? Even from the other main job?
3. Should I change to some other type of business entity more suited to this situation?
4. In light of any suggestions, if and when I do break even, how would things change?
5. If I do make a profit (gratuitous tip/over-payment from a charity), and I only want to reinvest it into the work I am doing, do I still have to pay income tax on it?

Sometimes it just makes me wonder, if only man hadn't overcomplicated things, many more people would do simple kind deeds. Sigh.

 

[Becky]

I think, strictly speaking, you need to contact HMRC to confirm whether you should complete a tax return. The rules are that if you have over £2,500 in untaxed income then you need to submit a tax return - note it says income, not profit. Given that your income appears to be less than this, and your profit is zero, then I would have thought that HMRC wouldn't ask you to submit a tax return. However, if you make a loss then you can set it against your employment income - but you can only claim to do this if you file a tax return. If you set your loss against your employment income you may get a refund of tax paid through PAYE.

 

[Becky]

There is more information here: https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return