Backdating self-employment declaration when tax already paid?

Bargain_Rzl

I am full-time employed, a standard rate taxpayer on PAYE, and I do some other things on the side, as a result of which in May 2000 (00/01 tax year) I gained a regular additional (self employed) income of £1248 per annum which I immediately contacted the Inland Revenue about. Rather than register me self employed, the IR adjusted my PAYE tax code (by listing £1248 as "other emoluments") so that my personal allowance was reduced by £1248. This figure has remained constant ever since, and I have been required to confirm this from time to time.

In the 06/07 tax year my self employed income rose to £1528 and from 07/08 onwards it's likely to be about £1700 with slight variation. Obviously making adjustments year-on-year would be complicated and I have just contacted the IR to declare the change and to ask for the whole sum to be formally registered as self-employment income (obviously with small earnings exemption from NI). As a result I have been told on the phone that I may still receive a penalty notice for late notification! Obviously, I have always been entirely honest with the IR about my income, and have been being taxed the correct amount on the extra. Surely if the IR registered it incorrectly (even if the amount of tax I've paid since has worked out the same) I should not be penalised?

Advice from anybody with experience of this would be appreciated.

Cute_'n'_Quirky

Do you have no expenses with your sales?

To my way of thinking you are losing out on a lot by not being self-employed.
However, you are supposed to inform the IR of becoming self-employed when you actually do it.

Considering that the IR actually knew about your income I fail to see how they can say you didn't tell them!

Bean_Counter

HMRC form CF10 states that if your self-employed earnings are less than £1,300, then the National Insurance Contributions Office (NICO) might exempt you from Class 2 contributions.

Dependent on your current Class 1 NI contributions, you may be entitled to apply for exemption from Class 2 NI anyway.

However I believe that you are still required to register. I would still appeal any notice you may receive on the basis that you did call to tell them some years back, they knew about it because they altered your tax code, but they forgot to register you. You could claim that you thought you were registered but were exempt from Class 2 NI, and that is why it has not come to light until know, when you have called you inform them because you self-employed earnings rose over the £1,300 limit.

Might not work but worth a try.

Bargain_Rzl

Cute_n_Quirky wrote: »

Do you have no expenses with your sales?

To my way of thinking you are losing out on a lot by not being self-employed.

It's not sales, my main "additional" is through being a church singer, and I don't incur any expenses through this as such. I suppose, thinking about it, I could offset the cost of singing lessons and music purchases...

However, you are supposed to inform the IR of becoming self-employed when you actually do it.

That's my point - I was honest with them from the start and, as far as I'm concerned, I did give them the opportunity to tell me that what I was doing would be classed as self-employment. It was one of their advisors that told me that all I needed to do was declare it as additional earned income and it would be taxed as an adjustment to my tax code.

Considering that the IR actually knew about your income I fail to see how they can say you didn't tell them!

Yep, I'm thinking a covering letter should do the trick...

...I hope...

Cute_'n'_Quirky

Do keep records of petrol costs, music purchased etc. It is all allowable - don't just pay income tax on every penny you are paid. I know it is a pain to have to do it but it would be worth it to you in the long run.

WHA

I wouldn't worry about the prospect of being fined for late notification. It sounds like you were unlucky and got the wrong CS adviser. There should be no reason why they can't just adjust your code and let it carry on as before, and they're just scaremongering about the penalty.

I don't think it is formally written down anywhere, but you would almost certainly avoid the late notification penalty because your earnings are still too low to pay self employed NIC (under circa £4,500 p.a.), and in these cases, HMRC generally don't issue the penalty. In fact, very few of those who should have paid NIC get the penalty. In the last few years since the penalty was imposed, I've only ever seen one penalty notice for late notification and that was for someone who was about 2 years late notifying, and should have been paying NIC for all that time as their S/e income was over the threshold.

It isn't worth losing sleep over as it is unlikely to happen, and even if it does, you would get it waived because you clearly did tell them when it first started.