A few questions before I start business

Legacy_user

Hi peeps,

I now have an ebay business on the side (proper retail stock etc etc) and I am estimating the profit would be £500 per month. Not a lot but it helps me get rid of my debts. Everything is above board, invoices etc etc

But obviously, I , like everyone want to avoid as much tax as possible.

Now I do GENUINLY have an office that I use to do this work. I would think I could pay myself rent of approx £300 per month. Would this be acceptable to the tax man.

Obviously that would be a business expense. Id also use my car to deliver stock as well, locally. Is that allowed?

Basically the way its looking is that although it will have a turnover of ~£10k the profits would be less than £50

Is the above reasonable?

Cheers

Stu

Debt_Free_Chick

13000 wrote:

Now I do GENUINLY have an office that I use to do this work. I would think I could pay myself rent of approx £300 per month. Would this be acceptable to the tax man.

I would say that's excessive, even if you were using the office to do the work full-time. I was full-time in my own business last year and charged £520 for the whole year i.e. £10 per week!

Obviously that would be a business expense. Id also use my car to deliver stock as well, locally. Is that allowed?

Yes - simply keep full records of every journey, note the mileage and then claim 40p for every mile. This covers everything i.e. petrol, maintenance, depreciation etc. You charge nothing else for any car expenses.

Basically the way its looking is that although it will have a turnover of ~£10k the profits would be less than £50

Is the above reasonable?

Cheers

Stu

I think you will quickly grab the attention of the taxman and soon find yourself under investigation. Your business expenses must be those you actually incur, solely for business purposes. The use of home as an office will be a focus. You really need to think how much time you actually spend in that office doing this work. You would probably get away with £10 a week as that doesn't cause any alarm. You might get away with £20, but any more and you must be able to justify the cost.

Why do you think use of one room in your house for (presumably) a few hours a week would command a rent of £75 per week? Where's the cost? And would someone else realistically pay that price to rent the room from you?

Remember that the cost of buying any stock is a business expense. As are the following:

Telephone/internet
Printing, postage & stationery
Repairs & renewals (e.g. to any equipment)
Motor expenses (@40p per mile)
Any other travel expenses
Professional fees (e.g. accountant)

But you can only charge the exact expenses that are caused by running this business e.g. only telephone calls directly related to the work you are doing.

Strongly suggest that you contact the Inland Revenue to get help.

Or have a look at the practical guidance available from Business Link

HTH

Cook_County

I note that you will be paying rent for the use of the office. Presumably you will then report this as income, so I cannot see the tax saving here.

The car and related expenses require capital allowances and claims for business mileage. A log will be required to track business mileage. The 40p a mile is I believe for employees so will not be relevant.

Cost of buying stock is not the only thing to concern yourself with. You'll also have to include opening stock and closing stock in your accounts to figure your profits.

Overall you can only claim expenses wholly & exclusively incurred in the course of the business. If you are only making £50 a year then why would you be bothering?

I assume you have registered to pay Class 2 NIC.

Debt_Free_Chick

Cook_County wrote:

I note that you will be paying rent for the use of the office. Presumably you will then report this as income, so I cannot see the tax saving here.

Ah ... I missed that! Thought he was just claiming an amount as an expense for using an office at home - d'oh!

CIS

With only a £50 profit, they would suspect tax evasion straight away, why would £10K takings generate £50 profit ?.

Most likely would be all over your books and checkng that the £300 rent was being declared as income.

As a soletrader, effectively you are the business, so shuffling money around wont affect the tax you owe.

System

Hi peeps,

TBH, I just loath the possibility of giving the tax man even more on top of the £800 per month he already gets

I just hate the IR with a passion. I'm just trying to minimise the amount thats gets taxed. I realise £50 on 10K is a bit OTT but I really begrudge paying it.

Thanks for the advice though, and I do have other tax deductions such as the accountant etc ( I only have a v basic day books knowledge of accounting). I'll let you all know how it goes

System

well TBH jackdoor, yes I want to avoid paying tax. As for the country running on thin air, well i dont paying the PC brigade to screw the country up or our fat cat MPs that get it on with their assistants no doubtadly using public money. Not forgetting all the workshy layabouts that work cash in hand. now my little rant about the state of the nation is over ......

I do want to keep it legal, dont misunderstand me, hence why I intend to employ an accountant. I just want to be very borderline. Ie i would prefer to go out my way to avoid paying tax. I just think I get exceptionally poor value for money.

irnbru_2

13000 wrote:

Ie i would prefer to go out my way to avoid paying tax.

You want to save on tax not avoid it.

IIRC, any tax avoidance schemes have to be declared.

13000 wrote:

I just think I get exceptionally poor value for money.

Lets hope your customers don't think the same ....