Registering as a Business

katelina

Husband and his friend have decided to start up together in business part time. However, they have been selling since May a few bits and have just been on the Inland Revanue website and it says they have to register within 3 months of starting :eek:
What are the penalties for not registering with them yet? Surely if a record has been kept of everything and they are going to pay the tax etc they will be ok?

Horace

The rules have changed but the HMRC havent gotten around to changing their website yet, it is no longer 3 months. It is possible that the HMRC can fine them especially if they think they have been trading for a long period - as you claim they have been trading since May then the HMRC may wonder if they have been trading longer and thus avoiding paying tax and NI.

They had better register now - the HMRC self employment line are fairly friendly although how friendly they will be with someone who has been trading since May and not registering with them then I don't know.

smartpicture

I know someone who didn't register for around 18 months, earning considerable money. They eventually came clean and just had to pay the tax plus a 10% fine - it would have been a lot higher if they hadn't co-operated fully though.

katelina

Because his friend already has to fill in yearly tax returns, do you think it would be better for him to put the sales this year through his accounts (Although husbands name is on some invoices) and then both of them start up the business in the new tax year?

fengirl_2

What you are suggesting is tax evasion.

katelina

Surely its not if its going to go through his books and therefore tax will be paid.

fengirl_2

But its going through the wrong books!

katelina

You can see I'm green to this. So even though its his friend who's going to be the partner that has to do a tax return every year anyway,he cant put them through his own books.....but why?
Sorry if I'm sounding simple but never had to think about or do anything like this before.

soolin

Personally I think paying an accountant to do the basic work may benefit the partners here to avoid any fines or penalties from a genuine misunderstanting of the rules. Start of with an accountant to sort out the basics, and then once they have their registration and first year sorted they might be able to take it over themselves next year.

owner

katelina wrote: »

You can see I'm green to this. So even though its his friend who's going to be the partner that has to do a tax return every year anyway,he cant put them through his own books.....but why?
Sorry if I'm sounding simple but never had to think about or do anything like this before.

Because they will both have different allowances and circumstances so the tax to be paid will be different if it goes through one person rather than both. It may very well be less if done through both so not a bad thing.