Making tax digital for gig economy workers?

fistfulofsteel

DullGreyGuy said:

fistfulofsteel said:

My process is to log onto a platform, choose work I want to do, and get paid via PayPal in USD at a rate set by the platform. Once a year I look up how much I've withdrawn to my bank account in GBP in total over the year and enter that on my tax return as self employment income. That's the extent of my "record keeping" and HMRC have been happy with it for the last 15 years.

So, hypothetically, you earn $100,000 in a bumper year but are only transferring £25,000 into your bank account how much are you declaring? It sounds like you are only declaring the £25k which would be tax evasion as you've not declared the other c£52k

Have HMRC been happy with it or simply not asked questions? There is a big difference between flying under the radar and having an inspection which results in HMRC saying everything is being done properly. 

I transfer everything out of my PayPal account every two weeks. I wouldn't be able to spend it without transferring it so it would be of no use to me. Also I wouldn't want to leave large balances in PayPal.

Bookworm105

fistfulofsteel said:

DullGreyGuy said:

fistfulofsteel said:

My process is to log onto a platform, choose work I want to do, and get paid via PayPal in USD at a rate set by the platform. Once a year I look up how much I've withdrawn to my bank account in GBP in total over the year and enter that on my tax return as self employment income. That's the extent of my "record keeping" and HMRC have been happy with it for the last 15 years.

So, hypothetically, you earn $100,000 in a bumper year but are only transferring £25,000 into your bank account how much are you declaring? It sounds like you are only declaring the £25k which would be tax evasion as you've not declared the other c£52k

Have HMRC been happy with it or simply not asked questions? There is a big difference between flying under the radar and having an inspection which results in HMRC saying everything is being done properly. 

I transfer everything out of my PayPal account every two weeks. I wouldn't be able to spend it without transferring it so it would be of no use to me. Also I wouldn't want to leave large balances in PayPal.

so your audit trail for tax purposes is:
1. receipt of payment in USD $ into paypal to the value of the pro forma invoice representing hours worked x agreed rate of pay 
2. deduction of currency conversion and other fees
3. withdrawal of funds as GBP into UK bank account 

Technically therefore OP's "spreadsheet" is an inadequate record of their business as it does not record the gross value of sales (tallied to sales invoices) and understates costs, but the tax paid to date is probably correct 

The business turnover is in USD (easily enumerated using paypal's GBP rate)
From that the fees should be deducted as a cost of the business
that leaves net income which, in the absence of any other info, appears to also be net taxable profit and so when declared on a tax return will be the figure upon which tax will be calculated.

If, when populating the tax return OP has then deducted other costs to arrive at net profit, then technically the tax return is not presenting the full picture, but with no loss of tax I doubt anyone would care. 

use of MTD compliant software (probably including a direct link to paypal) would however require that the full & proper bookkeeping as outlined above is followed.