Self-employed tax help - please!

barfer

Hi,

My partner started a little business in 2010 selling some electronic gadgets he makes in the garage. I told him not to spend our money on it - but he spent about £2K :eek: on buying materials and bits n bobs. I've helped him go round giving out leaflets and getting a website. He's never sold anything!!! The business is a mega fail but we are £2K out of pocket.

I've asked him to claim the £2K as a tax loss on self asessment. But he's saying that as he didn't register the business with hmrc and didn't mention it on his tax return before he might get into trouble with them or get a fine. Can someone who's been in this boat tell us whats going to happen if we try to claim the loss against the tax from his job? I swear we're not trying to cheat the hmrc - if we'd made money, we'd have declared it!!!

somethingcorporate

barfer wrote: »

Hi,

My partner started a little business in 2010 selling some electronic gadgets he makes in the garage. I told him not to spend our money on it - but he spent about £2K :eek: on buying materials and bits n bobs. I've helped him go round giving out leaflets and getting a website. He's never sold anything!!! The business is a mega fail but we are £2K out of pocket.

I've asked him to claim the £2K as a tax loss on self asessment. But he's saying that as he didn't register the business with hmrc and didn't mention it on his tax return before he might get into trouble with them or get a fine. Can someone who's been in this boat tell us whats going to happen if we try to claim the loss against the tax from his job? I swear we're not trying to cheat the hmrc - if we'd made money, we'd have declared it!!!

I do not think you cannot offset self-employed tax losses against paye income.

barfer

somethingcorporate wrote: »

I do not think you cannot offset self-employed tax losses against paye income.

Oh. :(:( That's a bit bad. If he'd made profits, i'm sure they'd have added them on to his paye income and taxed him at 40%. Doesn't seem fair to me.

InsideInsurance

On what basis is he already doing tax returns then if he is an employee in his other life?

barfer

InsideInsurance wrote: »

On what basis is he already doing tax returns then if he is an employee in his other life?

He rents out his old flat which he had before he moved in with me, so he has to pay the tax on that.

Savvy_Sue

somethingcorporate wrote: »

I do not think you cannot offset self-employed tax losses against paye income.

I am not so sure about this, but the problem is that it could look as if it wasn't a 'proper' business, ie evasion rather than avoidance.

somethingcorporate

Yep, I cannot remember the specific details. I know you cannot offset losses on renting property against anything else and was fairly certain about the self-employed income bit too...

Savvy_Sue

somethingcorporate wrote: »

Yep, I cannot remember the specific details. I know you cannot offset losses on renting property against anything else and was fairly certain about the self-employed income bit too...

I'm with you on the first bit, less convinced of the second, at least in 'normal' circumstances, ie you're self employed AND employed, but make a loss on the s/e side. But I am not an accountant, and haven't been s/e for some time. May be worth doing a search on the Cutting Tax board, although I can't remember any recent threads, and on HMRC, and elsewhere.

I'll move this over to Cutting Tax later ...

somethingcorporate

Here is the official view from HMRC.

http://www.hmrc.gov.uk/helpsheets/hs227.pdf

barfer

somethingcorporate wrote: »

Here is the official view from HMRC.

http://www.hmrc.gov.uk/helpsheets/hs227.pdf

Cheers, that looks like what we need to read! :beer:

Savvy_Sue

As promised

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