Self employment and tax return


A

Aosmosis

Hi,

During the Summer of 2006 I had a 2 week stint of being self employed.
I had just passed my professional exams, and in the process of looking
for a training post I registered with some agencies for work.

I managed to earn about £800, however I had costs such as
professionaly body registration, indemnity, transport etc etc.

I informed my local tax office and told them that I was no longer self
employed.

I have just realised that I am supposed to send something in to the tax
office by jan 31st or I will get £100 fine.

I have received nothing fromt he tax office or a tax return.

What should I do?

Thanks
 
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M

Martin

Hi,

During the Summer of 2006 I had a 2 week stint of being self employed.
I had just passed my professional exams, and in the process of looking
for a training post I registered with some agencies for work.

I managed to earn about £800, however I had costs such as
professionaly body registration, indemnity, transport etc etc.

I informed my local tax office and told them that I was no longer self
employed.

I have just realised that I am supposed to send something in to the tax
office by jan 31st or I will get £100 fine.

I have received nothing fromt he tax office or a tax return.

What should I do?

Thanks

###############################################

Relax.

Keep a note of any conversations you had with the tax office.

Unless you owe some tax for TY 05-06, you cannot be fined for non-submission
of 06 Tax Return because penalty is smaller of Tax unpaid at 31 Jan or £100.

If you will owe tax for 06-07 (i.e. including your s/e income for summer
06), or if you receive 07 Tax Return in April 07, then you need to submit 07
Tax Return by 31/1/08.
 
R

Ronald Raygun

Aosmosis said:
During the Summer of 2006 I had a 2 week stint of being self employed.
I had just passed my professional exams, and in the process of looking
for a training post I registered with some agencies for work.

I managed to earn about £800, however I had costs such as
professionaly body registration, indemnity, transport etc etc.
Are registration and indemnity needed for your "proper job", the
training post which you presumably have now secured? If so, it might
be simpler to set them against income from that.

Transport? Be sure you're really entitled to this. Any travel costs
which are essentially in the nature of commuting are not an allowable
expense. Travel between home and clients might be OK if you can establish
that you are "working" from an "office" which happens to be your home,
i.e. that your commute from home to office is a zero distance, and that
you visit your clients from the office rather than the home. :)
I informed my local tax office and told them that I was no longer self
employed.
For a two week period it hardly seems worth becoming formally self employed.
It would have been perfectly OK just to put those earnings (after expenses)
on the next tax return under the "miscellaneous earnings" category.
I have just realised that I am supposed to send something in to the tax
office by jan 31st or I will get £100 fine.
No you aren't and you won't. This month's deadline relates to tax
returns and tax payments in respect of the 2005-6 tax year. Anything
you earned in sumemr 2006 is part of the 2006-7 tax year.
I have received nothing fromt he tax office or a tax return.

What should I do?
Sit tight. You will probably be sent a return in April.
If nothing comes by June, ask for one.
 
P

Peter Saxton

Hi,

During the Summer of 2006 I had a 2 week stint of being self employed.
I had just passed my professional exams, and in the process of looking
for a training post I registered with some agencies for work.

I managed to earn about £800, however I had costs such as
professionaly body registration, indemnity, transport etc etc.

I informed my local tax office and told them that I was no longer self
employed.

I have just realised that I am supposed to send something in to the tax
office by jan 31st or I will get £100 fine.

I have received nothing fromt he tax office or a tax return.

What should I do?

Thanks
Martin has explained that there isn't anything to worry about
regarding the 31 January 2007 deadline but are you sure you were self
employed when getting work through these agencies? Did you get any
payslips? Did you send anyone invoices?
 
A

Aosmosis

Ronald said:
Are registration and indemnity needed for your "proper job", the
training post which you presumably have now secured? If so, it might
be simpler to set them against income from that.

Transport? Be sure you're really entitled to this. Any travel costs
which are essentially in the nature of commuting are not an allowable
expense. Travel between home and clients might be OK if you can establish
that you are "working" from an "office" which happens to be your home,
i.e. that your commute from home to office is a zero distance, and that
you visit your clients from the office rather than the home. :)


For a two week period it hardly seems worth becoming formally self employed.
It would have been perfectly OK just to put those earnings (after expenses)
on the next tax return under the "miscellaneous earnings" category.


No you aren't and you won't. This month's deadline relates to tax
returns and tax payments in respect of the 2005-6 tax year. Anything
you earned in sumemr 2006 is part of the 2006-7 tax year.


Sit tight. You will probably be sent a return in April.
If nothing comes by June, ask for one.
Yes Indemnity , and professional body registration are essential for
both jobs.
I registered with an agency on a self employed basis, and I had to show
proof, which is why I rang the tax office who got me registered.
The client payed me directly. The travel involved going to clients
premises arround London, and involved buying a travelcard for that day,
about £10.40 as I was travelling peak time.
 
P

Peter Saxton

Yes Indemnity , and professional body registration are essential for
both jobs.
I registered with an agency on a self employed basis, and I had to show
proof, which is why I rang the tax office who got me registered.
The client payed me directly. The travel involved going to clients
premises arround London, and involved buying a travelcard for that day,
about £10.40 as I was travelling peak time.
What proof did you show?

You retained the travel cards?
 
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R

Ronald Raygun

Aosmosis said:
I registered with an agency on a self employed basis, and I had to show
proof, which is why I rang the tax office who got me registered.
The fact that you register with the tax/NI people as self-employed
and pay your Class 2 NICs doesn't prove that any particular work you're
doing is by way of self-employment, that question is answered by
reference to the nature of your relationship with the clients.

As a matter of interest, what profession is involved?

If you were working for different clients, it might make it more
likely that you would be deemed self employed.
The client payed me directly. The travel involved going to clients
premises arround London, and involved buying a travelcard for that day,
about £10.40 as I was travelling peak time.
Did you visit several different premises in one day? Typically the
tavel from home to the first, and from the last back home, would not
qualify, only the inter-client travel would, unless you could claim
to be "based" at home.

But if the most appropriate form of travel between client premises
would have involved buying this travel card, and if the ability to use
it for commuting as well did not influence that decision, then you
were just lucky that you got the commuting thrown in for free and
the whole expense can be justified on work grounds.
 
T

Tim

But if the most appropriate form of travel between client premises
would have involved buying this travel card, and if the ability
to use it for commuting as well did not influence that decision,
then you were just lucky that you got the commuting thrown in
for free and the whole expense can be justified on work grounds.
"Wholly & Exclusively" ? :-S
 
R

Ronald Raygun

Tim said:
"Wholly & Exclusively" ? :-S
Yes, the issue would turn on whether all the expenditure was incurred
W&E for a business purpose, and I'm pointing out that there can be
circumstances in which the mere fact that the expenditure has a
side effect of a private benefit, that is to say where the provision
of the private benefit does not increase the cost, then this would not
invalidate the allowability of the claim.

I'm assuming [perhaps incorrectly, in which case I take it all back]
that this card is some kind of unlimited-travel day pass for the tube,
and its purchase can be justified as the reasonable cost required to
provide all of the day's business travel.

If, however, the business travel can be had more cheaply by buying
singles, then the difference between the cost of the day pass and
the sum of that of the singles would have to be disallowed.

I dare say there could be complications there, for example if it
wasn't known at the start of the day how many singles would be
needed, and if the day pass was bought in the expectation that it
would be cheaper than the singles, but if it turned out that in fact
fewer trips would be made that day than expected, what then?
 
T

Tim

Tim said:
"Wholly & Exclusively" ? :-S
"Ronald Raygun" wrote
Yes, the issue would turn on whether all the expenditure was
incurred W&E for a business purpose, and I'm pointing out
that there can be circumstances in which the mere fact that the
expenditure has a side effect of a private benefit, that is to say
where the provision of the private benefit does not increase the
cost, then this would not invalidate the allowability of the claim.

I'm assuming [perhaps incorrectly, in which case I take it all back]
that this card is some kind of unlimited-travel day pass for the tube, ...
What about the similar situation of an "unlimited-talk" phone line rental?
[Fixed-cost per month, includes both line rental and all calls.]
Can you claim that as W&E business purpose? ;-)
 
M

Martin

Ronald Raygun said:
Tim said:
"Wholly & Exclusively" ? :-S
Yes, the issue would turn on whether all the expenditure was incurred
W&E for a business purpose, and I'm pointing out that there can be
circumstances in which the mere fact that the expenditure has a
side effect of a private benefit, that is to say where the provision
of the private benefit does not increase the cost, then this would not
invalidate the allowability of the claim.

I'm assuming [perhaps incorrectly, in which case I take it all back]
that this card is some kind of unlimited-travel day pass for the tube,
and its purchase can be justified as the reasonable cost required to
provide all of the day's business travel.

If, however, the business travel can be had more cheaply by buying
singles, then the difference between the cost of the day pass and
the sum of that of the singles would have to be disallowed.
Tosh. E.g. First class travel is allowed, even tho 2nd class will still get
you around. And who wants to queue up repeatedly to keep buying tickets?

Incidentally, we're talking a tenner here. Who in earth would even think of
quibbling?
I dare say there could be complications there, for example if it
wasn't known at the start of the day how many singles would be
needed, and if the day pass was bought in the expectation that it
would be cheaper than the singles, but if it turned out that in fact
fewer trips would be made that day than expected, what then?
You've really answered your own point. Reverse the situation - would HMRC
disallow a series of singles just cos a day-ticket might have saved a bob or
two. Or the traveller could have bought a "railcard" discount thingy. Or
walked ? - god forbid.... :)
 
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R

Ronald Raygun

Tim said:
"Ronald Raygun" wrote
I'm assuming [perhaps incorrectly, in which case I take it all back]
that this card is some kind of unlimited-travel day pass for the tube,
...
What about the similar situation of an "unlimited-talk" phone line rental?
[Fixed-cost per month, includes both line rental and all calls.]
Can you claim that as W&E business purpose? ;-)
Yes and no, depending on the circumstances.

With phone lines there is a presumption that you would have the
phone anyway, for private use, even if you were not running a
business from home. In particular, if you had the private phone
before the business even existed, that would be a dead giveaway
that the purpose would be at best dual.

However, if in addition to the private line you then installed an
additional line for the business, the latter's rental would qualify
as W&E for business.

Agreed?
 
R

Ronald Raygun

Martin said:
Ronald Raygun said:
I'm assuming [perhaps incorrectly, in which case I take it all back]
that this card is some kind of unlimited-travel day pass for the tube,
and its purchase can be justified as the reasonable cost required to
provide all of the day's business travel.

If, however, the business travel can be had more cheaply by buying
singles, then the difference between the cost of the day pass and
the sum of that of the singles would have to be disallowed.
Tosh. E.g. First class travel is allowed, even tho 2nd class will still
get you around.
Agreed, it's not the cost per se that's the issue. It's the fact that
the cost difference can identify a private use component. But:
And who wants to queue up repeatedly to keep buying tickets?
This is could be enough reason to go for the day ticket even if it
is more expensive.
Incidentally, we're talking a tenner here. Who in earth would even think
of quibbling?
Nobody, if it's a one-off. But this could be happenning every day for
months [not relevant directly to the OP, whose entire SE stint amounted
to only 2 weeks].
 
R

Ronald Raygun

Tim said:
I'm assuming [perhaps incorrectly, in which case I take it all back]
that this card is some kind of unlimited-travel day pass for the tube,
...
Tim said:
What about the similar situation of an "unlimited-talk" phone line
rental?
[Fixed-cost per month, includes both line rental and all calls.]
Can you claim that as W&E business purpose? ;-)
"Ronald Raygun" wrote
Yes and no, depending on the circumstances.

With phone lines there is a presumption that you
would have the phone anyway, for private use,
even if you were not running a business from home...
Are you saying that taxation is based on
assumptions, even if they are invalid? :-(
Not at all. Taxation is based on rules, and the relevant rule
here is that, to be allowable as a deduction from taxable income,
expenditure must be incurred wholly and exclusively for the
purpose of the business.

The aforementioned presumption does not directly govern the
question of whether the phone rental is allowable, it merely
forms the default assessment of whether it is W&E for a business
purpose. It would be valid in the vast majority of cases of
people working from home, that if they have a phone, it is there
for a private purpose as well. It's a similar situation with TV
licences. The default assumption is that every house has a telly
and so every address should have licence associated with it.
But of course quite few people coose not to have one, and so do
not have to pay the licence fee. I'd estimate that much fewer
people choose to have no phone than no telly. Whatcha reckon?

However, I would say that if it could be established to a reasonable
level of satisfaction that the person does not want or need a phone
for private purposes (and not having had one prior to starting the
business would seem to be pretty convincing evidence in support of
this unusual position) then the phone rental would be W&E for
business.
What if you used the same type of travel day pass before the
business started? Does that make the travel pass dual-purpose?
No. The day travel pass isn't really directly comparable with
having a private phone, because one can change one's travel
arrangements much more easily than one can decide to make
oneself unreachable by family and friends. Having a private
phone is as much about taking calls as making them.
Of course, just the same as if you bought *two* travel day
passes (one private & one business), the latter would qualify
W&E. But why would you, when each one is "all you can eat"?
Quite. I'm not sure I'm not coming round to the idea that the
pass would be disallowed completely. It's difficult to know
where to draw the line between the purpose for its purchase
having been wholly for business, but with some private benefit
occurring as a "side-effect", and the purpose having been
essentially for both.
But what if you also made private calls on the business line?
That's no problem, the cost of the private calls should either
be reimbursed to the business or be deemed income, exactly in the
same way that business calls on a private line are dealt with.
If the tariff deal happens to be such that the cost of making
calls is free, so be it.

The question for deciding whether the line rental cost is allowable
is whether you had an axe to grind when deciding to incur it.

One should be grateful, I suppose, that there is no "availability
for private use" test for phones as there is for company cars.
 
T

ts86

Ronald Raygun said:
This is could be enough reason to go for the day ticket even if it
is more expensive.
Because waiting around is time and that's a cost?
 
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R

Ronald Raygun

ts86 said:
Because waiting around is time and that's a cost?
Yep, but not just time but also irritation. An unhappy
worker is less productive.
 
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