Self assessment Tax bill and start up investments

schamness

Hi all, I've been out of the UK for about 10 years, and upon my return have been working self employed, so have no idea how the tax system works anymore.
I started my own business in July 2010, and although the business is doing ok, it's still in the red. I have been working as an IT contractor which has helped finance the launch of the business (I am registered as a limited company, and I am the Director) and on occasion I have had to use money from my IT job, to finance bills or emergency needs at the new business.

My accountant filed my first self assessment for me and I just got my Tax bill
However I did question my accountant, but they didn't seem to be able to give me an answer, as I have invested about 6K into the business, am I allowed to claim that on my self assessment?

Any advice on this would be greatly appreciated.

chrismac1

The answer is probably yes. The normal approach would be to claim this as either trading expenses or capital assets. Capital assets currently are 100% claimable for the first £100k. So you should end up with a loss, personally I would have advised you to operate as a sole trader until April 2011, which would enable you to offset the loss made against earned income and hence claim PAYE back. Then after that you trade limited, since the only way a limited company gets loss relief for a year 1 loss is against future year profits.

However, there may be reasons for operating limited other than tax, and especially in IT where many customers insist on dealing with limited company contractors.

ceeforcat

I agree with the premise that the op should have operated as a sole trader initially. However, I get the impression that he did not (although I agree that this is not clear)- does he not now just have a balance on his directors current account of 6k which he can now withdraw, presumably to pay his tax bill? If this is the case, and it is not clear, he cannot, of course, claim that on his Self assessment.

schamness

Hi all, I hope I can help clear things up.
So what I call my 9-5 job is my IT job which I'm working as a contractor.
I started my other business in July 2010 and registered it as a Ltd co. in September because my bank advised me that I would need to be registered as a limited co to get a business account with them and be able to register to accept Credit/Debit card payments.
I know I've been suckered by a lot of bad advice in my first year, and I'm kicking myself because of it.
I had tried getting advice before starting up from places like Business Gateway etc, but I found them less than useful. (They also told me i'd need to register as a limited company).

So My contracting job pays me about 34k a year.
My new business doesnt pay me anything at the moment.
The directors current account balance owed by the new business is about 6k, but the new business isnt turning a profit yet.
It's breaking even so no money in the bank to take from it to pay the lovely 8k tax bill for the contractor side of things.

It's a mess huh?
Guess I should just call HMRC and ask for a payment plan

chrismac1

Have you been raising sales invoices in the name of your limited company? Have you been getting suppliers to raise invoices in the name of your limited company? If yes, you just need to bite the bullet on the bad advice. If not, there is at least some justification for saying you've operated so far as a sole trader and unravelling some of the transactions in the company books. (Prepares for a ton of bricks to land on head from the HMRC posters on this site!)