Not registered as self employed

unholyangel · 18 October 2019 at 10:10PM

Pennywise wrote: »

It's what the law says that matters, not what the HMRC website says. HMRC have form for making up rules to suit them that have no basis in law. Like another poster has said above, they spent years saying directors "must" register and submit SA returns, despite there being no actual law to say that. Registration for SA for self employment is exactly the same situation - there is no LAW requiring it if there is no tax nor NIC liability.

(1)Every person who is chargeable to income tax for any year of assessment and who has not delivered a return of his profits or gains or his total income for that year in accordance with the provisions of the Income Tax Acts shall, not later than one year after the end of that year of assessment, give notice that he is so chargeable.

I just quoted the layman version since some people struggle to read plain english never mind legalese.

TheCyclingProgrammer · 18 October 2019 at 11:26PM

unholyangel wrote: »

Actually, it states:

Its also explicitly stated on gov.uk:

That annual exempt amount referenced in the manual you linked is referring to the £1000 - not the personal allowance (which is not an exempt amount, it is just liable to tax at a rate of 0%).

I suggest you read it again. The part you are quoting relating to the annual exempt amount relates to chargeable gains (CGT), not income tax and is completely irrelevant. The second paragraph you quoted is the part that relates to income tax. NIC is covered by separate legislation but the principle is the same.

You are also incorrect about the personal allowance being a zero rate band but it doesn’t matter. The point that matters is whether there is any net liability and if your income is within the personal allowance, there is no chargeability to tax and nothing to notify.

If it were an offence to fail to notify HMRC when you have no tax liability then they wouldn’t be able to fine you anything because failure notify penalties are based on a percentage of the unpaid tax due. Which would be zero.

TheCyclingProgrammer · 18 October 2019 at 11:41PM

unholyangel wrote: »

I just quoted the layman version since some people struggle to read plain english never mind legalese.

The Taxes Management Act isn’t that complicated. It simply states that you are required to notify HMRC if in any given tax year you become chargeable to tax (ie there is a liability because you have earnings above the personal allowance or any other exemptions or allowances and tax has not already been deducted at source).

MrsFingersCrossed · 19 October 2019 at 12:24AM

I'm in a very similar position, but heading towards pension age.

You probably won't have to pay any tax at all as it sounds like you are well below the personal allowance threshold. BUT, it is still well worth registering as self-employed so you can pay voluntary Class 2 National insurance. This is a small amount per year (approx. £150) which will count towards your state pension qualifying years and is open to low earning self-employed people who do not earn enough to pay tax or compulsory National insurance. It is a voluntary payment.

I've been doing this for some years to get to full state pension since I was made redundant in my 50s. I earn a pittance as an artist but it still entitles me to make class 2 voluntary contributions towards my state pension, rather than the class 3 voluntary contribution of approx £750 which employed or non-working people have to pay to make up any missing years.

Ring HMRC on 0300 200 3300 and explain your situation. I spoke to them today about a very similar thing and they were very helpful - there's nothing to worry about from what you've said in your post, you just might have to fill in a simple online self assessment tax form each year. It sounds daunting but once you get into the form most of it doesn't apply if you are earning so little, but doing the necessary admin protects your pension and maybe other potential benefits too.

MrsFingersCrossed · 19 October 2019 at 12:59AM

Rhi, another thought has just occurred to me. I don't know if you receive child benefit, but if you do there is no need to make voluntary NI contributions as the years you receive child benefit count towards your state pension qualifying years. Also, it sounds as if you are young so you might feel you have plenty of years of working life ahead to make up the required 35 years, so you could decide not to pay voluntary contributions if that is the case. Of course if your earnings take you above the NI threshold you will have to pay them, but the self-employed class 2 is still cheaper, though I think once you get to a certain level of income you have to pay class 4 :

Extract from Gov.uk website:
'Class 2 if your profits are £6,365 or more a year, Class 4 if your profits are £8,632 or more a year. You work out your profits by deducting your expenses from your self-employed income.'

unholyangel · 19 October 2019 at 9:12AM

TheCyclingProgrammer wrote: »

The Taxes Management Act isn’t that complicated. It simply states that you are required to notify HMRC if in any given tax year you become chargeable to tax (ie there is a liability because you have earnings above the personal allowance or any other exemptions or allowances and tax has not already been deducted at source).

And this is why I posted the laymans version.

Ask a solicitor what chargeable means in relation to that act. Because it doesn't mean that you actually have something to pay. It means that its liable for tax calculations (aka taxable income).

Plus, that paragraph you're saying doesn't refer to income tax is based on s7 of the TMA 1970. Which (in its entirety) states:

7Notice of liability to tax
(1)Every person who is chargeable to income tax for any year of assessment and who has not delivered a return of his profits or gains or his total income for that year in accordance with the provisions of the Income Tax Acts shall, not later than one year after the end of that year of assessment, give notice that he is so chargeable.
(2)A notice under this section shall be given to the inspector or, in the case of an individual who is not chargeable to income tax other than surtax, either to the inspector or to the Board.
(3)If any person fails to give a notice which he is required to give under this section he shall be liable to a penalty not exceeding £100.

And if you notice, it refers to income tax, not chargeable gains tax. Because there is no such thing as chargeable gains tax. There is capital gains tax (CGT) and chargeable event gains (CEG).

ETA: I should also perhaps highlight the exemption you're quoting is two pronged. In that you must have gains below the annual exempt amount (£1000 in this case) and either have no net liability or had sufficient tax deducted at source. Just having no net liability isn't an exemption.

TheCyclingProgrammer · 19 October 2019 at 6:46PM

unholyangel wrote: »

And this is why I posted the laymans version.

Ask a solicitor what chargeable means in relation to that act. Because it doesn't mean that you actually have something to pay. It means that its liable for tax calculations (aka taxable income).

Plus, that paragraph you're saying doesn't refer to income tax is based on s7 of the TMA 1970. Which (in its entirety) states:

And if you notice, it refers to income tax, not chargeable gains tax. Because there is no such thing as chargeable gains tax. There is capital gains tax (CGT) and chargeable event gains (CEG).

ETA: I should also perhaps highlight the exemption you're quoting is two pronged. In that you must have gains below the annual exempt amount (£1000 in this case) and either have no net liability or had sufficient tax deducted at source. Just having no net liability isn't an exemption.

I give up. I didn’t say there was something called chargeable gains tax. I have no idea where you got that from. By “chargeable gains” I was simply referring to capital gains in excess of the annual exempt amount.

The paragraph you quoted referring to the “annual exempt amount “ is talking about GAINS. As in capital gains. Not income. It is not referring to the “hobby tax” allowance of £1k. The CGT equivalent of the personal allowance for income tax is called the Annual Exempt Amount. THIS is what that is being referred to which you have erroneously confused with the £1k hobby allowance.

https://www.gov.uk/guidance/capital-gains-tax-rates-and-allowances

If your income/taxable profits are within the personal allowance then you have no obligation to report it to HMRC.

I ask you again, if you were obliged to notify HMRC even though you have no liability, what would the penalty be?

TheCyclingProgrammer · 19 October 2019 at 6:54PM

And regarding this “two pronged” condition, you’re absolutely right. You just have:

1. No capital gains in excess of the annual exempt amount. That’s £12k for this year. OP has not mentioned anything about capital gains so fair to assume they don’t have any. That condition has been met.

2. No income on which tax is due or which hasn’t been taxed at source. If OPs taxable profits were always within the personal allowance then that condition is also met.

TheCyclingProgrammer · 19 October 2019 at 7:16PM

One final point. You claim to have quoted the TMA “in its entirety” but you haven’t. Income that would not incur any tax liability is specifically covered by s7(7) which is not found in the original TMA but was added in the 1994 finance act. This provision means that if the only income received would not be liable to tax on any self assessment then it is not notifiable.

https://www.legislation.gov.uk/ukpga/1994/9/schedule/19

Bobby_Bouche · 20 October 2019 at 12:30PM

I thought the worst initially but when I got an accoutant it seems 2 out of my 4 years there was no tax liability.
These forums are a great source of information and some truly knowledgable people, but no substitute for real advice from an accountant.

Good luck.

Not registered as self employed

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