New SE - allowable expenses and business type Q

MrsTinks

I've just registered as self employed and the nice HMRC lady kind of talked me through all of it But I have a couple of questions I forgot to ask her and the DFW SE people suggested you lot might be the guys to ask

Firstly I told her my business was mainly Admin stuff - there is some IT work lined up too which I plum forgot (was a bit nervous having never dealt with HMRC before!) so when I get the forms etc do I just put IT and Admin in a box somewhere or do they really not care so long as it's a service provider role instead of say selling goods or working the street corners? :cool:
Second - would I be better off setting up a seperate account for my SE work? I have two accounts as it is and any more might just get confusing and it's for a pretty small amount of money to be fair... But will it just be easier? or will they still want to check all my accounts anyway (not that I'm hiding anything - just that it might look confusing to people that I have so many accounts - one for my salary and main outgoings, one that I pay money into when I have sold things my daughter has outgrown on Ebay or Gumtree etc and her CB goes into etc and now possibly a 3rd for my SE earnings). If they check all of them then I don't see the point in opening a 3rd account as I'd have to detail everything anyway wouldn't I? I guess I'm mainly worried they'd think money from selling the baby stuff in particular would be earnings and should be counted as tax - obviously the Ebay stuff I can easily prove is used baby stuff etc but the things I sell on Gumtree... sliiiightly trickier - so random cash amounts being paid in might look suspicious
Thirdly - alowable expenses - is there a list somewhere? I am sure I could probably claim internet but my internet is actually free (long story) so guessing claiming for that would be difficult "Yes I'd like to claim £0 for my internet please..." :rolleyes: But there will be occassional driving and stuff involved which I guess could be claimed...

Sorry if the questions are muddled and very silly - this is all VERY new to me but I don't want to get things wrong! :eek:

John_Pierpoint

To be self employed the authorities would like to see something that looks like a business (or more than one business if you provide two distinct sorts of service). You should have some sort of Invoice issuing system, even if it is only an account book with carbon copies that you keep as evidence.

An account that is only used by the business is almost essential. If you were to be audited, you don't want the tax man crawling all over your private personal spending as you try to remember what each entry in your statement means.

As a minimum you need to be able to show how the money came into and out of the business for years after it happened.

Going somewhere on business in your own vehicle takes 0.40 GBP off your profits per mile (for the first 10K business miles per year) but you must be able to explain where you went and why.

You have to be business like about what you do right from the start even if you are only making a few thousand a year from your self employed status.

Son't forget to investigate the National Insurance situation - it does eventually buy a state pension.

MrsTinks

Thanks John I'll not be doing any high or exciting figures so think investing in an invoicing system is a bit OTT I could probably have done "cash in hand" but I'm ultra paranoid and wanted to make sure everything is above board! If lucky we're talking £50-£80 a month - once in a while I might be REALLY lucky and top £100 a month! :eek: oh the excitement! :rotfl:
So I'll look at an invoicing book I think and I might just move all the things from the spare account to my main account and use that from now on. The only regular income in there is the Child Allowance or what it's called of £20 a week. I mainly kept all the Ebay etc stuff seperate as it's my "baby treats" money - but there is no reason it can't go in the savings account associated with my main account when it comes in so I can still at least mentally keep it seperate

Rolo_Tomasi

The Revenue do courses for the newly Self Employed which come highly recommended. To answer your queries:

1. You have to give a brief outline of the type of work you are doing however this is only so the Revenue can compare your income and expenditure with others in the same industry. From your post is appears that you will mainly be charging for your time so I don't think it matters that some is Admin work whilst at other times you will be doing IT work.
2. You do not have to have a separate bank account but it is highly recommended so that you can keep all of your business income and expenditure in one place. Make sure that you keep details of any private items that you are selling to prove that they are not taxable income.
3. There is no list of allowable expenses. You need to think to yourself would I have spent that if I wasn't self employed? If the answer is no then it is probably allowable. The sorts of expenses which may be allowable are computer costs, stationery, postage, motor expenses (either mileage or receipts), insurance, telephone, home office.

I would also advise that you consult a local accountant. I realise that many people think that this is an unnecessary expense for a small business but in my experience it is small business that benefit most from proper professional advice.

Pennywise

Your business book-keeping should "mirror" the bank account used for your self employment, so it is best to keep any private transactions out of it as these mean extra inputs into your book-keeping which takes more time and can cause confusion and error. Keep things simple - you really don't want to be getting yourself confused and having to waste a lot of time doing the book-keeping. For such a simple business, I'd suggest you use a free cash book program from www.vtsoftware.co.uk which makes it very easy to record and reconcile the business "books" and has account headings which match the self assessment tax return which you'll have to fill in next year.

MrsTinks

Thanks Rolo! That made it sound very simple and easy to understand!
I have already asked to go on one of the half day courses and am just waiting for them to contact me to go on that

Thank you both for taking the time to answer my ramblings The SE world looks a scary place from the outside if you've never dealt with it before so your advice is MUCH appreciated

fengirl_2

In my view, if you try and register as self employed, describing yourself as admin, this may cause HMRC to question your status. An administrator is normally an employee and they may want to question you further about how you obtain work, who you work for and on what terms.
I think you need to describe your business as 'business services' or something a bit more business-sounding.

MrsTinks

They didn't question it when I registered on the phone But then I didn't say "administrator" I said "ad hoc admin work" wether that makes any difference at all I have no idea... but I guess I'm leaning more and more towards changing it to Business Services - it seems to cover a multitude of "sins" as it were Could include IT work, admin work and all sorts really I guess

John_Pierpoint

These people seem to have a fairly approachable attitude towards the tax or ordinary people.
Here is their explanation of the difference between employee and the self employed:
http://www.litrg.org.uk/help/lowincome/employed/employedor.cfm#Any
You can of course be both in the course of a week, depending on which job you are working on.