Two small sole trader businesses - combine on tax return?

pinkteapot

I have a job where I earn PAYE. I registered in January as a sole trader as I'd started making/selling greeting cards. This will make me a few hundred pounds a year at most (it's just a hobby thing).

I've now started doing a bit of freelance proofreading/editing.

Do I need to register the second thing as another sole trader business with HMRC, and in future complete two self-employed tax return sections, one for each business? Or can I just put the total of revenue, costs and profits for the lot, combined?

I don't have much free time so again, the editing etc will probably be max £500 a year.

Does it make a difference to the tax that will be due if I have say:

Business 1
£300 revenue, £100 costs, £200 taxable profit

Business 2
£500 revenue, £50 costs, £450 taxable profit

OR

Business
£800 revenue, £150 costs, £650 taxable profit?

I did my first return in April which just has the cards business on it. I used the cash basis as I didn't know how to account for stock etc. (Just in case this makes any difference to the answer).

PasturesNew

I'd just lump it all together. As the figures are small they won't be particularly interested in you breaking it down.

purdyoaten

It's not really that important, given the income. However I would separate them - who knows how they will each expand in the future? Moreover, there should be only three figures to enter on each self-employed section.

It will make no difference to your taxable income.

Edit: There you go - two minutes and two different opinions although we do agree on the lack of importance in your circumstances.

pinkteapot

I'm similarly nonplussed by it due to the size. I used to do writing/editing on a freelance basis a few years back but was turning over £10k per year so quite different!

I've done the return this year and know it's just three numbers - in/out/profit. I did highly doubt HMRC would ever ask to see my full accounts to back up the figures for this scale of business. They're probably just grateful I've even declared it.

I really wanted to check that there wasn't an HMRC rule that I HAD to separate them.

If not, I'll ponder in the run-up to next April (my accounting date = tax year date). My accounts are a simple Excel list of revenue and expenses. Currently combined but I was already thinking about doing each business on a separate sheet so that if one is loss-making it won't be masked by the other. In that case, I'd have the numbers to hand for each separately.

I know that if I phone HMRC to register the editing thing as a separate one, I have to do it within three months of inception.

Thanks both, even if the opinions were different!

PlutoinCapricorn

I would combine everything for HMRC too. Think of yourself as a portfolio worker, which covers many types of work. You can keep your own separate figures, or use colour codes, for the different income streams.

It seems to me that your work and income are not different or big enough to warrant separating them for HMRC.

JazzySasha

Hi Pinkteapot
Yes, there is a HMRC rule so you should keep separate records for each of your two trades. At the moment, since the amounts are very small and both trades are making a profit, there is no effect on the tax you pay. However, if in future there were losses, then it could make a difference. There is no such thing as a 'portfolio worker' for tax purposes.

Since you will only be reporting three figures for each trade, I can't see that it would be overly onerous to do it properly. If your Self Assessment Tax Return were to be randomly selected for enquiry, I'm sure you would prefer to be in a position to show you had done things correctly.

As you are already registered as self-employed with HMRC for your greetings card business, you don't have to register again for the second trade. The only reason to combine the turnover figures for both trades would be to establish if your total turnover exceeded the VAT threshold - but you are a long way off that.

HTH

zygurat789

JazzySasha wrote: »

Hi Pinkteapot
Yes, there is a HMRC rule so you should keep separate records for each of your two trades. At the moment, since the amounts are very small and both trades are making a profit, there is no effect on the tax you pay. However, if in future there were losses, then it could make a difference. There is no such thing as a 'portfolio worker' for tax purposes.

Since you will only be reporting three figures for each trade, I can't see that it would be overly onerous to do it properly. If your Self Assessment Tax Return were to be randomly selected for enquiry, I'm sure you would prefer to be in a position to show you had done things correctly.

As you are already registered as self-employed with HMRC for your greetings card business, you don't have to register again for the second trade. The only reason to combine the turnover figures for both trades would be to establish if your total turnover exceeded the VAT threshold - but you are a long way off that.

HTH

Do you have a reference for that? Your post does not suggest that these separate business records should be reported separately.

JazzySasha

Sorry, I though my 2nd paragraph explained what I meant, but to be clearer - each trade should be declared separately.

Tax legislation requires that profits are arrived at by preparing accounts using UK GAAP principles - the results for two separate businesses (trades) starting on different dates would not usually be combined in one P&L account. Additionally, relief is given for trade losses by making a claim. This would not be possible if the results for two businesses are 'netted off'. (In any case, there are various ways of using a trade loss and simply deducting it in the same year from other trade profits may not be the best use of such losses).

If you look at The HMRC help notes for completing a Self Assessment Tax Return (SA105) they clearly state at the foot of page TRG2 "You will need separate Self-Employment pages for each business". This is the same for a partnership which has more than one trade - "You must fill in a set of Partnership Trading pages for each trade or profession carried on by the partnership" (page PTRG7 of guide SA850).

antrobus

zygurat789 wrote: »

Do you have a reference for that? Your post does not suggest that these separate business records should be reported separately.

I would doubt it.

"There is no statutory definition of ‘trade’." So there clearly is no legal basis for distinguishing one trade from another.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM20000.htm

JazzySasha wrote: »

...If you look at The HMRC help notes for completing a Self Assessment Tax Return (SA105) they clearly state at the foot of page TRG2 "You will need separate Self-Employment pages for each business". ...

HMRC say that, and if you ask them, they will tell you to complete a seperate SE page for each business. But since there is no defintion of what constitutes a 'business', people are free to use their own defintion, and combine all manner of different activities in one single business. And believe me they do.

It's also worth noting, that since the OP is only making a few hundred quid out of each activity, HMRC won't really care anyway.:)

JazzySasha wrote: »

..This is the same for a partnership which has more than one trade - "You must fill in a set of Partnership Trading pages for each trade or profession carried on by the partnership" (page PTRG7 of guide SA850).

Just a side note; a 'profession' is actually different from a 'trade' for some technical tax purposes.

zygurat789

JazzySasha wrote: »

Sorry, I though my 2nd paragraph explained what I meant, but to be clearer - each trade should be declared separately.

Tax legislation requires that profits are arrived at by preparing accounts using UK GAAP principles - the results for two separate businesses (trades) starting on different dates would not usually be combined in one P&L account. Additionally, relief is given for trade losses by making a claim. This would not be possible if the results for two businesses are 'netted off'. (In any case, there are various ways of using a trade loss and simply deducting it in the same year from other trade profits may not be the best use of such losses).

If you look at The HMRC help notes for completing a Self Assessment Tax Return (SA105) they clearly state at the foot of page TRG2 "You will need separate Self-Employment pages for each business". This is the same for a partnership which has more than one trade - "You must fill in a set of Partnership Trading pages for each trade or profession carried on by the partnership" (page PTRG7 of guide SA850).

There is no need to apologise I understood exactly what you wrote. Wh at I was looking for was a reference In tax legislation. as opposed to notes to a tax return, which You have still not given and as you can see there are others who are sceptical of the claims you have made.
When it comes to claiming loss relief then it would appear necessary to be able to differentiate between the various sources of income as in the Thorne case.

zygurat789

antrobus wrote: »

It's also worth noting, that since the OP is only making a few hundred quid out of each activity, HMRC won't really care anyway.:)

I would entirely agree but then, at some point, their attitude will change, it's always better to be ahead of the game.