Claiming expenses

Jack2007

Hi,
Im almost ready to start my own business. I have a bank account ready(personal), and I need to purchase some items.

I dont want to register the business until I am sure its all going to go ahead and want to know if I purchase the goods before I have registered the business, will that cause problems when I try and claim the expenses back?

It will all be bought on the same account used for the business.
Thanks
Jack

steve1980

You should not be using a personal account for business transactions.

Also, you don't register the business, but you have to register that you are going to be self employed.

If you haven't done this yet then it needs to be done ASAP at http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm

You can fund the initial purchases from your own money but everything MUST be recorded.

Jack2007

Hi,
Thaks for the reply.
As soon as I register as self employed wont that immediately increase my NI/tax contributions?

Or can I inform them when I start trading?
Thanks again,
Jack

steve1980

Yes and no.

You will pay tax on anything you earn if this is a second "add on" job. If this is your only job then you need to earn over your personal allowance before you pay any tax.

With NI you will need to pay by DD the £2.50 odd weekly. Don't forget that within this it goes towards your pension etc.

taxsaver

You do not need to rush to register. You can claim expenses related to establishing the business that are incurred before the business starts from, believe it or not, up to 7 years before!

You do need to register with HMRC as self-employed but you have up to three months from starting in which to do that; take longer and you could face penalties.

Regardless of when you register, you must ensure you keep records of everything and receipts.

martindow

taxsaver wrote: »

You do need to register with HMRC as self-employed but you have up to three months from starting in which to do that; take longer and you could face penalties.

Although there are still references to a three month period on HMRC's site and in some leaflets, I understand that you are now expected to contact them as soon as you start trading.

Savvy_Sue

steve1980 wrote: »

With NI you will need to pay by DD the £2.50 odd weekly. Don't forget that within this it goes towards your pension etc.

If your income from self employment is expected to be less than c. £5000 (may be more now) then you can request an exemption certificate. If you have a job in which you're paying NI, it's not worth paying the s/e bit if you don't have to.

Caterina

Still on expenses, I am helping a friend to set up her business and some of the advice here has been very helpful (Thank you!).

However when I rang the Inland Revenue "helpline" they were not terribly helpful. I asked them if the books that she bought in preparation for her business (prior to 1st Dec, her first day of trading) are allowable, since she ordered just befor she started and was charged after 1st December because of Amazon delivery delays).

They replied that because (they thought) she used these books as "training", no training is an allowable expense and she could not claim for them at all, which we found unbelievable!

She is a doula, working with mothers in childbirth and in the immediate postnatal period, so she needs to keep herself updated on cultural issues around helping birthing women from diverse cultures etc...as well as building a library of books that she can lend her clients.

Books are a vital tool of her profession. We could also not understand the issue that they mentioned, re. "no allowable expenses for training", surely anyone who is in a job that needs continuous professional development and incurs expenses in the process of getting the information would be entitled to claim this as an expense, no?

Any help would be gratefully received. Thank you.

debbie42

The rules behind whether you can claim for training expenses are such that you can claim for things which you need for your job, but NOT if it's to enable you to start a new career. So, if you are training up as, say, a beautician after having been a car mechanic, then you can't offset the expenses of new training courses against tax. However, once you are a practising beautician, you can claim for ongoing expenses.

My accountant says I can offset technical manuals against my expenses, so if your friend is already qualified as a doula, then manuals would be completely acceptable, I'd have thought.

If you are unsure, I'd ask an accountant.

Caterina

Thank you for your help Debbie, that is exactly what we thought.

I tried to explain to the IR people that she is already qualified and needs the books for the clients, not for training purposes, but they were really not very forthcoming wtih advice (unsurprisingly). I shall however pass your answer to her. I am sure she will at some point get an accountant but so far her earnings are very low and she is just relying on my friendly admin help!

Best regards,

Caterina

Premier_2

Caterina wrote: »

Still on expenses, I am helping a friend to set up her business and some of the advice here has been very helpful (Thank you!).

However when I rang the Inland Revenue "helpline" they were not terribly helpful. I asked them if the books that she bought in preparation for her business (prior to 1st Dec, her first day of trading) are allowable, since she ordered just befor she started and was charged after 1st December because of Amazon delivery delays).

They replied that because (they thought) she used these books as "training", no training is an allowable expense and she could not claim for them at all, which we found unbelievable!

She is a doula, working with mothers in childbirth and in the immediate postnatal period, so she needs to keep herself updated on cultural issues around helping birthing women from diverse cultures etc...as well as building a library of books that she can lend her clients.

Books are a vital tool of her profession. We could also not understand the issue that they mentioned, re. "no allowable expenses for training", surely anyone who is in a job that needs continuous professional development and incurs expenses in the process of getting the information would be entitled to claim this as an expense, no?

Any help would be gratefully received. Thank you.

I think HMRC were probably confused by the term training.
They would assume you meant training of your friend, either to start up the business or as ongoing development. debbie42 has explained how this is treated.

As to books given to expectant/new mothers as part of their training, your friend should just declare these as stock (even if that stock is then given away free of charge as part of some overall fee structure for services provided)