Just gone Self Employed - Advice please

littlemissroadrage

I left my normal (PAYE) job in Aug and started working as SE from Nov. Now I know I have to register SE within 3 months so i have till the end of this month.
Question is, I paid £3500 for a course in Sept that if i didn't pass then I wouldn't be able to do the job I'm doing or be SE so can I do a "back claim" on that for tax purposes? or shall i just tell the tax office I started SE in Sept and pay the £100 fine for not telling them within 3 months as this £3500 could really help to reduce my tax.

I have to say that I have been advised not to even register until late April (less obvious to tax man) and not worry about any reciepts before that date, I know this is illegal but it would help me to clear debts I have got by not working since Aug. (I have to say that this bit didn't come from the accountant!)

Savvy_Sue

I don't know that you can offset that course against your tax liability anyway, so I'd suggest a call to the local HMRC office to see what they say. You can always say "I was thinking of ..." and "If I were to ...", although I've always found them very helpful in general terms, ie without them asking for your name address date of birth inside leg measurement etc.

silvercar

You leave employment, do a course then start work. The starting SE work date doesn't have to be immediately the course finishes. If the course is eligible then it will be eligible whenever you started work, I wouldn't get hung up on the £100 fine.

greatbridge

silvercar wrote:

You leave employment, do a course then start work. The starting SE work date doesn't have to be immediately the course finishes. If the course is eligible then it will be eligible whenever you started work, I wouldn't get hung up on the £100 fine.

you cannot claim for course fees as job/business expenses unfortunatly,

hjd

It depends what the course was. The test for self-amployed people is that an expense is "wholly and exclusively" for business purposes. For employees expenses must be "wholly, exclusively and necessarily" for work purposes. You are allowed to claim qualifying pre-trading expenditure against your self-employment profits.

Inaat

Unless your course, is wholly, exclusively and necessarily for the purpose of your business, it will not qualify as trading expenditure. The test is very difficult, if n
ot impossible to meet. I would advice you to inform the Revenue that you are now self employed, the revenue are smarter than your average bear. However, they have been known to fogive the fine if earnings in your first year are low. I would not take that risk personally. Good luck!

sarahlouise210

If the training was to give you new skills and expertise that you lack then you would not be able to claim tax relief in the form of expenses - the course fee would be seen as a capital expenditure..this would include courses that lead to a professional quaiification.

buglawton

My wife did something very similar in November 04 but registered within 1 month. There are excellent opportunities to back claim. For example, we learned that equipment purchased 1 or 2 months before starting SE (ie while still in the PAYE situation) but which was purchased in preparation for going SE, was back claimable as an Expense and this was succesfully done.

sarahlouise210 may be correct about the Capital bit although there might be exceptions for training. All this means is that you spread the amount of expenses claimed out on a capital item over several years. The Capital allowances rule is meant for equipment that is theoretically resaleable so I'm not sure how you would resell that item!

You should register ASAP and try to get inside the 3 month limit. You will very likely get a tax rebate eventually as usually SE income is small to start with & you probably have overpaid in PAYE for part of the tax year. Also register for the cheap National Insurance deal (Class 2 NICs) which works out at a few pounds per month for a starting SE, it ensures continuity of benefits. It only rises when you make money.

hjd

Inaat wrote:

Unless your course, is wholly, exclusively and necessarily for the purpose of your business, it will not qualify as trading expenditure. The test is very difficult, if n
ot impossible to meet. I would advice you to inform the Revenue that you are now self employed, the revenue are smarter than your average bear. However, they have been known to fogive the fine if earnings in your first year are low. I would not take that risk personally. Good luck!

For a self-employed person the test is wholly and exclusively NOT wholly, exclusively and necessarily - that applies to an employee.

littlemissroadrage

How about if its because of the Government that I had to do the course?
Left my job in Aug, done a 4 week course in Sept, nothing for few weeks while finding work then started in Nov.

In the security industry we have to be licenced from March 06 otherwise we can not work legally. That course was so I could get my licence otherwise I would not be able to work. Surely thats an expense which I can claim back, it is wholly and exclusively for the purpose of my business.

Start off earnings aren't low, I've already worked out I will be well past the 40% bracket so I'll be buggered for tax next year

mattt44

To be honest, you probably will have an account to work out your tax if you are in the 40% tax bracket, I would leave it up to him to work out at the end of your trading year.
The best advice I can give you, is to find someone you know well, that has a really good accountant and use him, note, I do not say really expensive accountant.
Your accountant should be your best friend if you are SE, if you don't get on, or understand what your accountant is doing, move.
Within reason he should be able to give you the best advice for your circumstances for most things.
Like most experts, not listening to a good accountant can cause you problems, ask if you should be registered and I think he will say yes.

Personally, I like to stay "the grey man" where the IR is concerned, I don't like to draw attention to myself in any way. Same with VAT, first problem I had with a late payment, I had someone on the phone saying they were coming to do a check up on my business.

Edit
BTW, if your going to be above 40% tax, ask your (good) accountant about becoming a Ltd company, it might save you money on tax and NIC.
It might also stop you going bankrupt if you have to fork out large sums for jobs.