Strange Advice from Tax Office

kriss_boy

A few years ago I used to sell guitars on the internet and making decent money out of it I recieved a phone call from the inland revenue.

I was a student at the time and a little niave but I was simply advised to fill in back dated self assessment tax forms and that was the end of that.

At the time I implied that I didnt make much money from it and that was why I hadnt ever filled in the self cert forms, I certainly didnt earn enough to pay tax on it.

The guy from the inland revenue however suggested I keep the business going regardless of it making money as to use his words "you'll get your broadband, phone etc" for free.

What did he mean and was it legit?

fengirl_2

His suggestion is perfectly legal, although a little outside his remit to suggest it!
What he is saying is that if you continue as as elf employed guitar seller and continue to make a loss, that loss can be set against your other income (assuming you are now employed). This would give rise to a tax refund, so essentially you are getting tax relief on your phone, etc where you would not normally do so. Its not free - its tax relief at your highest rate.
What he didnt point out of course is that if you go on making losses yera after year, your inspector could decide that this is just a hobby and stop the loss releif.