Help needed on when to inform tax office

jopat

Hi,
I have been selling/testing the market since May 07 to see if there is a demand for my product.
I have not gone over the £4.000 band.

I would like any advice on when my reserch becomes a buisness? Will I get a £100 fine if I inform them, even if i'm not earning enough?

If so it seems silly that you only have 3 months to decide if you can make a buisness work.

Or do I only have to inform tax office if I earn over the tax band?

Any help please

fengirl_2

What is this £4000 band?
You need to register your business with HMRC within 3 months of starting. The reason for this is that you have to pay Class 2 NIC from day 1 - this is not retrospective and it protects your NI record. If you can show that your profit for the year is going to be below the lower limit, then you will get exemption, but still retain your NI record.
So, its not really about tax, in the first instance, its about NIC and you could get a fine for not registering.

Murdina

the real issue is whether or not you have actually started to trade, or are in a pre-trading situation (the expenses for up to 7 years before you start to trade can be allowed against the trade on day 1).
It depends what you are doing but I would say once you hold yourself out as able to make a sale then you have started to trade - a good enough rule of thumb anyway.
If you think what you are doing is more akin to market research, based on which you will then set up a trading operation, then it may be arguable you have not yet started to trade.
Have a read of http://www.hmrc.gov.uk/manuals/bimmanual/BIM70510.htm and surrounding pages if you think there is room for doubt in your case.