Help with business startup

Ashley3283

Hi,
I started selling parts on eBay back in March but have not yet registered with HMRC as self employed.
I am employed full time and do the eBay business in my house in my spare time.
I have recently started to make a fairly decent profit and would like to be legitimate, i.e. pay relevant taxes etc.

What I would like to know is:

• If I register now and do my tax return in January would I be able to include the money made in march? (previous tax year) Or would I be fined for not declaring it.
• What can I claim for electric, gas etc.
• I have a car that I use for personal and business use, how do I calculate my business use? (pence per mile?)
• I expect to make around £4k profit per year so do I need to pay NI?
• Can I claim back purchases where a receipt does not exist? (Car parts from scrap yard to sell on eBay)

Apologies if this is badly structured but so many questions!

Thanks

Gertie_Walker

In answer to your questions:

• You would be fined for late notification of starting self employment which is a different fine from a late return. the reason is that you should have been paying class 2 NIc's since January. the tax for your first year's trading is not due until 31 Jan 2011. Your first accounts will go up to 31 dec 2010 and on your 09-10 SA you will need to declare 3/12ths of the profit for that year.
• You canot claim anything, but if you include all your business expenses in your accounts, this will reduce yur tax bill. If you use a room at home exclusively for business, it is usual to include that proportion of the household running costs. So if you use one bedroom out of 3 and have 2 reception rooms, your use of home would be 1/5th of the bills. If you only use the room for business part of the time, the amount is reduced in proportion. Ultimately, HMRC will accept anything reasonable.
• use of car is 40p pm for the first 10,000 business miles and 25p pm thereafter.
• If the £4k relates to a full accounting year, you will be able to claim small earnings exemption.
• Its good practice to keep all receipts, but you need to keep a note of costs where they are not supported by a receipt. if you can show an audit trail with cash being withdrawn from the bank to pay for purchases, this would strengthen your case in case of investigation.

I really think you need to go and see an accountant

Ashley3283

Gertie_Walker wrote: »

In answer to your questions:

• You would be fined for late notification of starting self employment which is a different fine from a late return. the reason is that you should have been paying class 2 NIc's since January. the tax for your first year's trading is not due until 31 Jan 2011. Your first accounts will go up to 31 dec 2010 and on your 09-10 SA you will need to declare 3/12ths of the profit for that year.
• You canot claim anything, but if you include all your business expenses in your accounts, this will reduce yur tax bill. If you use a room at home exclusively for business, it is usual to include that proportion of the household running costs. So if you use one bedroom out of 3 and have 2 reception rooms, your use of home would be 1/5th of the bills. If you only use the room for business part of the time, the amount is reduced in proportion. Ultimately, HMRC will accept anything reasonable.
• use of car is 40p pm for the first 10,000 business miles and 25p pm thereafter.
• If the £4k relates to a full accounting year, you will be able to claim small earnings exemption.
• Its good practice to keep all receipts, but you need to keep a note of costs where they are not supported by a receipt. if you can show an audit trail with cash being withdrawn from the bank to pay for purchases, this would strengthen your case in case of investigation.

I really think you need to go and see an accountant

Thanks for your help/advice above, I have just called the HMRC to advise them that I have started a self employed business and she didn't mention any fines so hopefully they wont impose any. If they do then its an expensive lesson learnt.


I live in a one bedroom house (1 bedroom, bathroom, kitchen & living room) and am using my living room for 2-3 hours per day, how would I calculate my business costs on that?
Presumably the 40p pm covers costs like insurance, tax, maintenence etc.

How much would an accountant charge me to discuss my situation?

thanks again

Gertie_Walker

The poeple who man the helplines are only trained to take your info, they are not Inspectors, who are the ones who make the decisions.
Your use of home costs would be one half of your household bills, divided by the number of hours in a week, times the number of hours you use the room. But as I said, anything reasonable is acceptable.
The 40p pm covers all vehicle running costs.
Most accountants would give you half an hour free and they should be able to give you some idea of how much they would charge to do your accounts. The better your records, the cheaper it would be.

Mahmood_Reza

You can also claim for an element of computing costs, restricted to business use (eg allowances on the PC). If the house is rented then you claim an element of the rental cost, interest if owned. As mentioned earlier an accountant should give you some free time to discuss further, speak to at least two.

paulwf

Gertie_Walker wrote: »

The poeple who man the helplines are only trained to take your info, they are not Inspectors, who are the ones who make the decisions.
Your use of home costs would be one half of your household bills, divided by the number of hours in a week, times the number of hours you use the room. But as I said, anything reasonable is acceptable.
The 40p pm covers all vehicle running costs.
Most accountants would give you half an hour free and they should be able to give you some idea of how much they would charge to do your accounts. The better your records, the cheaper it would be.

Where did the halving come from?

OP please phone HMRC and ask for help on this one and they will direct you to the relevant guide on the website as I'm not sure if the expenses guides I've found on their site are still current. Remember the room has to be used exclusively for business for the portion of time you use it, so if you Ebay from the kitchen table whilst your OH is cooking dinner you couldn't claim for the heating and lighting during that time.

They used to do a scheme where if you claimed £2 a week for home usage you didn't need to provide full utility bills. The "nominal amount" scheme worked well, I thought it had gone up to £3 a week but can't see a guide that backs that up or says it is still running.

Gertie_Walker

In this example, the OP can include one half of the household bills as s/he has 2 rooms and uses one part-time for business. I have gone on to describe how the bills need to be further reduced to account for the actual time the room is used.
The £2/3 pw paul mentions is for employees, not self employed people to whom different ruls apply.
HMRC, being the gamekeepers, are the last people I would ask for advice on business accounts from, which is why I have suggested seeing an accountant

FOURCANDLES_2

Of course see an accountant to start with for advise or go to business link , but that should be it, you should be able to do it yourself after the advise has been given to you otherwise I wouldnt bother doing the small business.

paulwf

Gertie_Walker wrote: »

In this example, the OP can include one half of the household bills as s/he has 2 rooms and uses one part-time for business. I have gone on to describe how the bills need to be further reduced to account for the actual time the room is used.

The way I understand it is the OP has 4 rooms but you would exclude the bathroom under HMRC guidelines so you'd split the bills by a third not a half. (Technically you can use area rather than room numbers but it seems they allow room numbers for simplicity).

The £2/3 pw paul mentions is for employees, not self employed people to whom different ruls apply.

Are you sure? I've seen references to allowing this for self employed.

HMRC, being the gamekeepers, are the last people I would ask for advice on business accounts from, which is why I have suggested seeing an accountant

I've found HMRC to be very helpful, although I'm sure they are aren't going to go out of their way to save you money their helpline doesn't seem to want to catch people out, I get the impression they would rather people too advice than mess up their accounting. This is quite a basic tax scenario so I can't see any harm in contacting HMRC, and you could ask for advice without giving personal details.

An accountant is always a good idea of course.

I've found a guide here but of course it isn't HMRC approved:

http://www.oakacc.co.uk/what-can-i-claim-for-business-use-of-my-home

I used to use the "lazy option" as that guide calls it because some bills are very hard to calculate, e.g. we have a combined phone and broadband package so determining the broadband element is tricky. Plus I couldn't be bothered to keep utility bills

As before I'm not a specialist in this area it is just based on my experiences when I was classed as self employed. I'm prepared to be proved wrong and I hope more knowledgeable people will post here.

Sorry to disagree with you Gertie, I just worry people might use advice here for their HMRC returns so I'm concerned we can determine advice given is 100% accurate.

Gertie_Walker

Paul, before you start criticising my advice, maybe you should know that I was an Inspector of Taxes dealing with small businesses for almost 30 yrs.
The kitchen and bathrooms of a property are not included for expenses purposes as well have to wee and eat. I have stated twice that HMRC will accept anything reasonable and if the OP wishes to include £2/3 pw in his accounts, then he is free to do so, although there is no statutory basis for this. No Inspector is going to gain anything by asking for minor adjustments for use of home.
To say that we cannot rely on anything anyone says on here rather defeats the object of the forum, doesnt it? Maybe those with at least some practical experience beyond the personal could be given some credibility here...or maybe we should leave the forum to you, paul?

paulwf

Gertie_Walker wrote: »

Paul, before you start criticising my advice, maybe you should know that I was an Inspector of Taxes dealing with small businesses for almost 30 yrs.
The kitchen and bathrooms of a property are not included for expenses purposes as well have to wee and eat. I have stated twice that HMRC will accept anything reasonable and if the OP wishes to include £2/3 pw in his accounts, then he is free to do so, although there is no statutory basis for this. No Inspector is going to gain anything by asking for minor adjustments for use of home.
To say that we cannot rely on anything anyone says on here rather defeats the object of the forum, doesnt it? Maybe those with at least some practical experience beyond the personal could be given some credibility here...or maybe we should leave the forum to you, paul?

Hi gertie,

Please don't take it as a personal attack. As I hope I explained my wish is not to see anyone get wrong advice. I hope you would share that wish.

People CAN rely on information given on forums but only if it is backed up by a relaible source if there is disagreement. Until that point a forum should be a means of healthy discussion. I have provided a source but have stated it is not direct HMRC advice. Therefore please link to the correct HMRC guidelines so we can get to the bottom of this once and for all. That will give the OP exactly the information they require.

So far you haven't given any information to back up your points so it is one opinion against another. As I have already stated I am happy to be proved wrong, I have stated that it is not my expert field and I am happy to be corrected.

I'm sorry if written words can't convey the tone in which my posts were made. I await your links to HMRC guides so we can get to the bottom of this.