Tax on Mystery Shopping

jobbingmusician

Hi everyone - looking for help.

I work as a mystery shopping, as well as having a full time job (and I earn enough to be in the 40% tax bracket.)

I work for 2 mystery shopping companies. One taxes me - at normal rate of tax, but I guess that's easy enough to sort out with the IR as I have reported my last year's earnings to them and they have told me I owe them some tax (although they say this is due to an underpayment on my F/T earnings ) The other relies on me reporting my earnings to them, which I will do at y/e.

My question is about what I will be taxed on. The payments for mystery shopping are miniscule and would be smaller than the expenses incurred for doing the work if I reported all the expenses (petrol at 40p/mile, postage, internet useage). I want to know how the IR will treat the 'benefits in kind' from the shopping. These are usually a closely proscribed meal or meal and drink, or small amount of supermarket shopping where you have to follow close instructions as to what to buy. So although I am getting some benefits 'in kind', buying £6 of shopping when you are told what to buy is not at all the same thing as being given £6 to spend. And I wouldn't go out to restaurants and spend the amounts I am told to spend on eating-type visits. So I would be well :eek: if these shopping expenditures were taxed at 40%.......

Anyone know what the IR rules are?

TIA!

CIS

You have a tax free allowance of £4895, the next £2090 is atxed at 10%, then above that at 22% . The 40% band does kick in until you have earnings of £32400 +.

If you paid an income without tax deduction, you'll need to complete a tax return to declare all of your income.

It could be argued that the 'cash in hand' job is self employed, try this page
http://www.hmrc.gov.uk/employers/tmaemployed_or_self-employed.shtml

ctm_2

You won't be taxed on your expenses if it's money you have to spend, and then get it back,a s you receive no benefit. However, if you do receive a benefit, i.e you get to keep the shopping and get the money back, then it may be classed as a taxable benefit. You would then pay tax on this amount at your highest rate, which as you stated for you is 40%.

With the expenses incurrec, e.g petrol, declaring them will effectively be offset against the benefits received.

Your best bet is to write to your main tax office detailing the situation above and asking exactly what you should be paying.

jobbingmusician

Thanks ctm, that's what I was afraid of. It doesn't seem right, though - for example, if you were told to go and buy a white elephant* and you could keep the white elephant after writing your report on it, would you expect to be taxed on the whole cost of it?

*Remembering you can't even sell livestock on Ebay!

Also remember that they already know about the mystery shopping which I started in the last financial year, which is taxed at source (albeit at the wrong rate) - they haven't suggested to date that they tax the 'benefits' of MS, and I don't want to put the idea into their head! :rolleyes:

Fran

Just out of interest... (you don't have to answer if you think it's too nosey...).... why do you bother mystery shopping when you have a decent income already? Surely you could afford to buy a pub meal and at a place you want to go without all the hassle of returning info to mystery shopping company? Just intrigued....

jobbingmusician

I quite like reporting on the standards of service, and I'm sad enough to be interested in how service providers are judged

sarahlouise210

I have thought about this myself....I undertake mystery shopping..and I am also a taxman! I have not notified anyone about it,thinking as you do that it is a miniscule amount of money anyway (I most certainly am not in 40% bracket!) Durin my thoughts it has occurred to me that the mystery shopping is effectively classed as Self Employed work as no tax is deducted (not from mine anyway - I see you say one company does tax you).
Now...this could work in your advantage as lets face it the payments on the whole(especially if your talking about who I think you are talking about) are small. When you are Self employed and also employed via PAYE you can offset any losses made on your Self Employment against the tax you pay via PAYE. So,for example, say you received £100 for mystery shopping, but your expenses were £150.00. You would have made a £50.00 loss and could set that against your PAYE tax bill. However,I only consider the actual payment for the work to be taxable in any way, as the expenses (in the shop or restaurant) are expenses carried out wholly exclusively and necessarily in the course of your duties..i.e. you could not fulfil the job without buying the items in the job description. This is why you will see the 2 payments shown differently - shopper re-imbursment (expenses -not taxable) and shopper fee (taxable) In my case the total actual fees(not re-imbursement) for this year is under £25 so I am not too worried about having a deduction in my tax code for that amount..just to be above board!

Fran

sarahlouise210 wrote:

............................................................... Durin my thoughts it has occurred to me that the mystery shopping is effectively classed as Self Employed work as no tax is deducted ..............................

Wouldn't it be casual work as there's no obligation (contract?) on either side and no regular hours?

Cook_County

The income is almost certainly from self-employment because it meets the badges of trade.

However, HMRC have been busily spending the last few decades reclassifying groups of people (eg exam markers) as employees. If the entity you work for has been directed to treat you as an employee then you are employed. In that case the amount received - £25 in Sarah Louise's case - is taxable in its entirety. Sarah Louise is correct to say that if it is employment income then the reimbursed expenses are wholly, exclusively and necessarily expended and so are not taxable.

However, she is not correct if the income is received as self-employed income because the word "necessarily" is not relevant in this context. The expenses in such case need only be wholly and exclusively expended to not be taxable.

If the income is received as a self-employed person then one should be deducting unreimbursed expenses including such things as capital allowances on the business use proportion of the car and home computer plus business use of home, internet etc.

If this results in a loss each and every year then HMRC may well argue that you are not in business to make a profit, in which case the loss would not be deductible.

Therefore the fundemental issue to ask yourself is whether or not you intend to make a profit. If so then your losses are deductible (and you need to have registered as self-employed and claimed the small earnings exception from Class 2 NIC). If not, then the income can be declared as zero each year in the other income box on your tax return with an appropriate description in the white space.

MyUserNamesTaken

Cook_County wrote:

The income is almost certainly from self-employment because it meets the badges of trade.

However, HMRC have been busily spending the last few decades reclassifying groups of people (eg exam markers) as employees. If the entity you work for has been directed to treat you as an employee then you are employed. In that case the amount received - £25 in Sarah Louise's case - is taxable in its entirety. Sarah Louise is correct to say that if it is employment income then the reimbursed expenses are wholly, exclusively and necessarily expended and so are not taxable.

However, she is not correct if the income is received as self-employed income because the word "necessarily" is not relevant in this context. The expenses in such case need only be wholly and exclusively expended to not be taxable.

If the income is received as a self-employed person then one should be deducting unreimbursed expenses including such things as capital allowances on the business use proportion of the car and home computer plus business use of home, internet etc.

If this results in a loss each and every year then HMRC may well argue that you are not in business to make a profit, in which case the loss would not be deductible.

Therefore the fundemental issue to ask yourself is whether or not you intend to make a profit. If so then your losses are deductible (and you need to have registered as self-employed and claimed the small earnings exception from Class 2 NIC). If not, then the income can be declared as zero each year in the other income box on your tax return with an appropriate description in the white space.

Absolutely correct. Another thing to note is this: if you are working as a Mystery Shopper for a company that does not pay your tax, you must declare yourself as self employed (no matter how small your income is). Income is still income. Failure to declare self employed within 3 months of starting can lead to a nasty fine from Mr. Taxman. You can be both self employed and PAYE at the same time. Most mystery shoppers are both. If you don't earn a lot, you can normally apply for a small earnings exemption certificate. However, you must still declare any self employment.