Tax. Are you registered?

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Tod
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Tax. Are you registered?

Postby Tod » Fri Apr 09, 2010 10:03 am

I'm really surprised how many traders are not registered and do not pay tax on their income. Years ago I used to make leatherwork for bikers. After one of the shows some of the traders were contacted by the tax office and ended up having to pay estimated bills some of which were huge. The rumour was that some of them were lucky not to end up in prison. I wasn't contacted but then I was paying tax on my income as I do now.
What surprises me is that some traders have told me they don't pay tax and are well known and are advertising that they are shows or have web sites. I'm not an accountant but to me that is just asking for trouble. I can understand if some one makes a £5 here or there because they make some thing or sell some thing to their mates, but if they are a trader at shows etc and doesn't pay tax they can charge less and in theory under cut every one else.
After the bike show thing some of the big shows would not let sole traders come unless they proved they were legit. That doesn't mean they were paying tax but if they seemed iffy they weren't allowed in. I don't know if that is the case now.
I have noticed in the last few years that markets like the ILHF are asking for proof of insurance, do all shows, fairs, markets do this? If not IMO they should. The same rules should apply to every one.

To make it worse people boast they don't pay any over heads. :roll:



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Re: Tax. Are you registered?

Postby sally » Fri Apr 09, 2010 11:12 am

I've always felt its in our best interests to be registered as a business, even when we were turning over a tiny amount. I recall one year putting in a tax return that showed an overall profit for the year of just £97.50, and the tax office calling to check I hadnt put a decimal point in the wrong place :D If nothing else, keeping accurate records of what you spend and what you earn helps you work out realistic selling prices.



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Re: Tax. Are you registered?

Postby rowana » Fri Apr 09, 2010 11:35 am

When I ran a small business (not in this field) I registered- I even received a rebate one year because I made a loss. The downside can be awful if you don't, it really isn't worth it. There is also a lot you can ofset , like travel ,tickets, stall prices, accomodation, food...

The forms are not that hard to fill out and all you have to do to register is to call up your tax office and tell them- simple. You can then do the forms online yearly. I think if you are trading online or in public places you should register, you ARE a busines, even if it is a hobbyist business and you are working elsewhere paying tax. My personal opinion is that it is ony a hobby if you make the odd thing or two for friends or other hobbyists on rare occasions- not continually.

Places should be asking for insurance details, I had public liability insurance, it is only about £75 a year from the Market traders association- you never know when someone might get injured becasue of your stall or your products. My products were soft and squishy (hair extentions/ dread pieces) but even so it was best to be covered, how do you know your stall isn't going to fall on someone? I shudder to think that some people out there selling swords and heavy items may not be covered! If you are one of those, can you even imagine what a court case and compensation could cost you personally?
Last edited by rowana on Fri Apr 09, 2010 11:53 am, edited 2 times in total.



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Re: Tax. Are you registered?

Postby Merlon. » Fri Apr 09, 2010 11:44 am

Relevant part of HMRC website http://www.hmrc.gov.uk/startingup/index.htm
Business Link, things to bear in mind when starting a business http://www.businesslink.gov.uk/startingup
Couple of HMRC leaflets
http://www.hmrc.gov.uk/leaflets/se1.pdf
http://www.hmrc.gov.uk/startingup/working-yourself.pdf

If you start in business, strictly, you are supposed to tell HMRC within three months or you may incur penalties



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Re: Tax. Are you registered?

Postby Cap-a-pie » Fri Apr 09, 2010 11:51 am

Yes have to agree, its pretty easy to do the on-line form and the Tax Office even offered me a free half day course, which was great as they pointed out lots of things I didn't know could be claimed for. They seem more than happy to help, figure its less work for them in the end.


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Re: Tax. Are you registered?

Postby lucy the tudor » Fri Apr 09, 2010 2:29 pm

Did the course, it was well worth it, for the advice if nothing else.
They reckoned one woman didn't have a cat's of making money with her business idea, but that mine would spend about four years building up from negative to a slow profit and eventually may even make me a living- so if I could hold out through the lean years of building reputation and repeat custom, it would be ok.
A fairly accurate prediciton so far.
They have always been helpful on the phone and in person, it is just not worth the worry of not registering.


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Re: Tax. Are you registered?

Postby paul bennett » Fri Apr 09, 2010 3:49 pm

I registered in November and just got an accountant.

Its costing me about £300 a year, but the peace of mind alone is worth it. Im used to a certain amount of jargon and legalese, but the tax system gives me the fear. Fortunately, I keep obsessive records.


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Re: Tax. Are you registered?

Postby fensleather » Sat Apr 10, 2010 9:03 am

We to are registerd + i make an appt to see our local tax support team every year they are brilliant they cant fill the dreaded forms in but help you decipher the jargon + wot figures should go where and @ the end of the day we can sleep @ night knowin weve been honest + we dont have 2 hide hopin they aint knockin @ the door 4 tax evasion it just dont seem worth it. theyre 2 big 2 mess with


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Re: Tax. Are you registered?

Postby Miss Costello » Sat Apr 10, 2010 7:29 pm

It's funny, but I was talking to a friend about this. How do LH groups who charge a fee and therefore make a profit get around this?

If they are charging a fee to attend then should they be paying tax?

:?



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Re: Tax. Are you registered?

Postby sally » Sat Apr 10, 2010 7:38 pm

Miss Costello wrote:It's funny, but I was talking to a friend about this. How do LH groups who charge a fee and therefore make a profit get around this?

If they are charging a fee to attend then should they be paying tax?

:?


Don't societies and clubs come under a different set of rules? if individuals are getting to pocket the profits then yes, they should be paying tax on it, just as we should if we do some film work as many of us do from time to time and get paid for it.



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Re: Tax. Are you registered?

Postby Merlon. » Sat Apr 10, 2010 8:11 pm

Miss Costello wrote:It's funny, but I was talking to a friend about this. How do LH groups who charge a fee and therefore make a profit get around this?

If they are charging a fee to attend then should they be paying tax?

:?

Can of worms time....
An organisation or club which provides a service can be liable to Corporation Tax (CT) on monies received for providing that service.
If an organisation is classed as a "small club" by HMRC, that is a CT liabiliy of less than £100 (i.e. money due to be paid to HMRC) then HMRC can agree that the organisation or club is regarded as dormant for CT purposes.
Read for yourselves
http://www.hmrc.gov.uk/ct/getting-started/trading.htm
I worked in HMRC for 26 years, but never did CT it was always regarded as a bit of an arcane subject.
This is one of the reasons why some of the larger societies are limited companies



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Re: Tax. Are you registered?

Postby Miss Costello » Sat Apr 10, 2010 8:56 pm

Thanks Merlon,

I had a feeling it would be a tin of wrigglers....thanks for clarifying.

K



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Re: Tax. Are you registered?

Postby paul bennett » Sat Apr 10, 2010 9:23 pm

You can also register as a not for profit organisation.


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Re: Tax. Are you registered?

Postby Merlon. » Mon Apr 12, 2010 12:33 pm

Have checked with the people across the office this morning.
You can register as 'not for profit' organisation provided the group has no group owned assets (i.e. tentage or cooking gear, slop chest clothing) which could later be sold.
If the group has group owned assets then The group treasurer can submit a request to be considered as a small club, include with the request a copy of the latest accounts together with a copy of the constitution or articles of association of the group. HMRC can then agree that the group comes within the small club definition and then matter is sorted. Situation has to be reviewed every five years.



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Re: Tax. Are you registered?

Postby Neibelungen » Mon Apr 12, 2010 5:29 pm

Remember though, even if your a small club or society, the people involved (can be every member or the 'commitee' people) are personally liable for the groups expenses and legality. ie.. it's individuals who make the contract for an event/show/purchase etc, not the group/club/ society. a lot depends on the constitution and framework that you set up with in the first place. Most groups are an unicorporated association on an informal basis rather than anything structured and usually there's just one or two people at the helm.

It's only when you form it into a separate business(can be social purpose/NFP/community or charity) that's registered that personal liability is seperate from the individual, as the business entity itself can hold property and form contrats. That's not to say though that it's directors are excluded from personal responsibility if they act negligently or in a manner detrimental to the business' interests. Whole different ball game with taxes as well as your an emplyee/director then. Class 4 NIC's anybody !!

I've been going through all this in some detail recently, working with a couple of charities, community groups and in the process of setting up a Community interest Company.

It gets fun when you start doing funding aplications and you start having to work out metrics for inputs and outputs. !!!!


The Charity Commision has a set of general guides for Articles and Constitution frameworks , though charity orientated, but also worth looking at various 3rd sector websites for advice and information. Business Link has some good introductions explaining the basics and links to futher information.


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Re: Tax. Are you registered?

Postby Druid » Mon Apr 12, 2010 8:01 pm

Corporation tax is only aplicable fot Ltd companies. If you are not a Ltd company then you will probably be seen as a partnership and all 'partners' can be taxed on income. In most casers it would be easy to show that any income is only used to partialy offset considerable expenditure. For example, you can claim 40p per mile as a legitamate expense. A few shows soon eats up any fees without the cost of equipment. Training and battle practice are essential for most groups and travel to these should also be deductable. If you can show that you never make a profit then they can't tax you but as always it is best to keep records incase you are asked.

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Re: Tax. Are you registered?

Postby Merlon. » Mon Apr 12, 2010 8:35 pm

Druid wrote:Corporation tax is only aplicable fot Ltd companies. ......

Very sorry but that is incorrect...
HMRC introduction to Corporation tax
"Corporation Tax is a tax on the taxable profits of limited companies and other organisations including clubs, societies, associations and other unincorporated bodies"



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Re: Tax. Are you registered?

Postby Nigel » Wed Apr 14, 2010 8:34 am

And please listen to what Paul/Merlon says

He has worked for HMRC for yonks and is both wise to their ways and helpful and would be my first port of call for any tax query


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Re: Tax. Are you registered?

Postby KedlestonCraig » Wed Apr 14, 2010 9:40 pm

Druid wrote:Corporation tax is only aplicable fot Ltd companies. If you are not a Ltd company then you will probably be seen as a partnership and all 'partners' can be taxed on income. In most casers it would be easy to show that any income is only used to partialy offset considerable expenditure. For example, you can claim 40p per mile as a legitamate expense. A few shows soon eats up any fees without the cost of equipment. Training and battle practice are essential for most groups and travel to these should also be deductable. If you can show that you never make a profit then they can't tax you but as always it is best to keep records incase you are asked.

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It's very tricky - first of all you have to establish if you are actually trading.
Assuming you are "trading" then you can only charge as expenditure items related to that specific trade, such as van hire to get to the venue, food costs for the display etc. You can't simply offset the cost of that nice new harness against your earnings for the year. (you can in part but that's another set of transactions). I'm an accountant but not a tax specialist - get professional advice if you are in doubt.


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Re: Tax. Are you registered?

Postby Tod » Tue Jul 26, 2011 8:49 am

I don't know if its me getting older but I'm getting more and more bl**dy annoyed. As I said at the start of this thread if some one makes some thing on an occasional basis thats fine, I'd call it beer money or maybe they need a new bit of kit. But yesterday I was told about another trader who advertises (indirectly) on here, sells his wears at events and is under cutting quotes because in his words (OK hearsay) "I'm not stupid enough to pay tax". That was in a conversation relating to me and another well know leatherworker. Well I'm not stupid enough not to phone the HMRC :-x
So if you read this which I think you will, best you get registered before they find you, and the next time you want to throw insults around find some one else.



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Re: Tax. Are you registered?

Postby steven pole » Tue Jul 26, 2011 1:00 pm

This has got me worried. I go to events dressed as a chapman or itinerant trader and have belts etc hanging off my basket. I don't go with the purpose of selling them, but if someone does i'm happy. I'm lucky if I make £60 over three events. Do I have to register for tax etc?



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Re: Tax. Are you registered?

Postby Ganderwick » Tue Jul 26, 2011 1:23 pm

steven pole wrote:This has got me worried. I go to events dressed as a chapman or itinerant trader and have belts etc hanging off my basket. I don't go with the purpose of selling them, but if someone does i'm happy. I'm lucky if I make £60 over three events. Do I have to register for tax etc?


As your website clearly shows that you make items to sell, then you are effectively a business and must register with the HMRC. How much you make is irrelevent.



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Re: Tax. Are you registered?

Postby steven pole » Tue Jul 26, 2011 1:31 pm

I have had the website for over 2 years now and not sold anything from it, I think i'll turn it into a blog instead. I'll look into the business side of things but i'm not interested in doing leatherwork as self employed.



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Re: Tax. Are you registered?

Postby Tod » Tue Jul 26, 2011 1:38 pm

If you sell stuff on a regular basis and trade (which you do), regardless of how much you make you should register. In your case people know you as a leather/canvas worker because of your web site and posts here. Therefor you are a trader and should let HMRC know. I don't know if any one has ever gone to you rather than me or any other leather worker but if they have it means that you have taken business (assuming you got the order) away from those of us who have to pay tax on our earnings. Do you consider that fair?



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Re: Tax. Are you registered?

Postby steven pole » Tue Jul 26, 2011 1:50 pm

I was told that I should not worry about tax if I received under a certain amount in a year. But i'm looking into this more carefully now as I don't want you guys getting annoyed with me :-) .
Is there a catagory for people who sell items as a hobby like I do?



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Re: Tax. Are you registered?

Postby steven pole » Tue Jul 26, 2011 2:14 pm

Right. Phoned up the tax people and they said to keep a record of how much profit I make on anything I sell then phone and tell them about it at the end of each year. They would alter my tax code accordingly.



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Re: Tax. Are you registered?

Postby sally » Tue Jul 26, 2011 3:33 pm

steven pole wrote:Right. Phoned up the tax people and they said to keep a record of how much profit I make on anything I sell then phone and tell them about it at the end of each year. They would alter my tax code accordingly.


Yep, it really is that simple. If they send you a self assessment form, all you do is put in what you earn from 'normal' work (read straight off your end of year statement), then in the self employed bit put your profit or loss, and they tell you if you owe them a few extra pennies or not. Really straightforwards, and definately not worth the risk of going wrong with.



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Re: Tax. Are you registered?

Postby steven pole » Tue Jul 26, 2011 3:42 pm

Thanks Sally. Does it work the same if I am part time employed elsewhere?



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Re: Tax. Are you registered?

Postby sally » Tue Jul 26, 2011 3:50 pm

steven pole wrote:Thanks Sally. Does it work the same if I am part time employed elsewhere?



Exactly the same, last year for example I was full time with one employer, part time with another and self employed, each has a section of the form, just fill it in and you are sorted



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Re: Tax. Are you registered?

Postby steven pole » Tue Jul 26, 2011 3:59 pm

Ok, I think I get it. Thank you again and sorry if I annoyed anyone, I don't want to tread on anyones shoes :-)




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