Self employment as a sole trader

Navigator1

Can anyone give us advice?
My partner declared bankruptcy last July 2012. He is employed by a firm who pay him gross, as a self employed person. We have realised that he needs to complete a form for the inland revenue to register as sole trader. We are currently negotiating an IPA with the OR.
We are wondering if we should back date this to July 2012? We were under the impression that following bankruptcy, there was a nil tax code for one year. However, we have been told by a member of this forum, that this is not the case....or at least, only in certain circumstances.
In the meantime, we have been sent a tax assessment form for 2012/13. Help!

fiveyearplan

Start your tax from July 2012 (date of BR) to April 2013.

Self employed people do not get a nil tax code.

arcon5

I believe it's only nil tax code for employees under PAYE as the receiver collects what you would pay in tax

Navigator1

Thanks. So while we're negotiating the IPA with the OR, we need to be mindful of the tax that should be payed on current income. I'm presuming this will be in addition to the amount of the IPA?

debt_doctor

Hi,

You need to be mindful that the figure he presents as income to the OR is the net figure after all business costs, tax and NI have been met.
He should make sure that all costs incurred for the business are taken account of such as fuel, phone, postage, vehicles, tools, books, stationary etc.
So Gross income minus all business costs equals profit for assessment minus tax minus NI equals net income for IPA consideration.
Dont sign an IPA that you are not happy with and dont sell yourself short on reasonable expenses for your family.

DD

Navigator1

We're waiting for a reply from the OR about how he came to the proposed monthly payment for the IPA. We followed your advice about asking for this. Your comments above are also really helpful. Thanks.

debt_doctor

Thats good,
Make sure you come back here to discuss the info the OR provides.

DD

Navigator1

Yes we will thankyou.