Embyo business - Tax Question
Discussion
A few months ago, me and a workmate started flogging a bit of unwanted personal gear on Ebay. We used the same account to get the feedback rating up more quickly and it went quite well.
Flushed with our success, we invested the proceeds of our unwanted stuff to buy some new stock, which sold well, so we bought more.
Things have snowballed fairly quickly and we're now selling quite a bit of stuff . We're registered as traders on ebay and are effectively running a business. Obviously we're keeping records of income and expenditure, from which we can prepare accounts but what I want to know is, what we need to tell HMRC?
Do we need to tell them anything immediately, or as we're effectively a trading partnership, do we just need to file a self assessment return after April 5th, each declaring our share of the profits as income? or do we need to do more?
As it is, we're both in full time jobs on a PAYE scheme and neither of us have had to file a return for some time now. Although this is just a sideline, which has just evolved rather than been planned, we want to keep it legit as we can see opportunities for growth.
Flushed with our success, we invested the proceeds of our unwanted stuff to buy some new stock, which sold well, so we bought more.
Things have snowballed fairly quickly and we're now selling quite a bit of stuff . We're registered as traders on ebay and are effectively running a business. Obviously we're keeping records of income and expenditure, from which we can prepare accounts but what I want to know is, what we need to tell HMRC?
Do we need to tell them anything immediately, or as we're effectively a trading partnership, do we just need to file a self assessment return after April 5th, each declaring our share of the profits as income? or do we need to do more?
As it is, we're both in full time jobs on a PAYE scheme and neither of us have had to file a return for some time now. Although this is just a sideline, which has just evolved rather than been planned, we want to keep it legit as we can see opportunities for growth.
It certainly looks like you have set up a trading partnership.
The rules say that you are supposed to notify the Revenue that a trade has started within three months of the commencement of that trade.
When notifying the Revenue that a trade has started, you need to let them know what financial year end you have chosen for the business. You are not obliged to use the tax year end date of 5 April. In fact, I hardly ever use it for my clients as it is not a proper calender month end - which is normal for proper businesses.
Instead, I always opt for 31 March which is the closest "normal" year end to 5 April. However, you can pick any date you like - although you do need to be aware that chosing any date other than 31 March or 5 April will create an element of double taxation of some of your profits from your first period of trade. You will not get any relief for this double taxation unless you
i) change your year end date latee or
ii) cease trading
Once that is done, both partners will be set up to start paying their Self Employed Class 2 National Insurance contributions.
Afte 5 April 2009, THREE Self Assessment tax returns will be issued by the Revenue, one for each of the partners and a special partnership tax return. All three returns will need to be completed and submitted to the Revenue by 31 October 2009 of being completed and submitted on paper or 31 January 2010 if being completed and submitted on-line.
The rules say that you are supposed to notify the Revenue that a trade has started within three months of the commencement of that trade.
When notifying the Revenue that a trade has started, you need to let them know what financial year end you have chosen for the business. You are not obliged to use the tax year end date of 5 April. In fact, I hardly ever use it for my clients as it is not a proper calender month end - which is normal for proper businesses.
Instead, I always opt for 31 March which is the closest "normal" year end to 5 April. However, you can pick any date you like - although you do need to be aware that chosing any date other than 31 March or 5 April will create an element of double taxation of some of your profits from your first period of trade. You will not get any relief for this double taxation unless you
i) change your year end date latee or
ii) cease trading
Once that is done, both partners will be set up to start paying their Self Employed Class 2 National Insurance contributions.
Afte 5 April 2009, THREE Self Assessment tax returns will be issued by the Revenue, one for each of the partners and a special partnership tax return. All three returns will need to be completed and submitted to the Revenue by 31 October 2009 of being completed and submitted on paper or 31 January 2010 if being completed and submitted on-line.
Thanks Eric, I was rather hoping you would reply.
We appear to have fallen at the first hurdle, as it's more than 3 months, in fact nearer 6, since we started buying stock. So do we 'fess up and hope we don't get sent to jail,
or do we need to negotiate with the revenue and agree a start date less than 3 months ago?
I realise that ignorance is no excuse, but we didn't envisage this going the way it has. What you've told me this morning isn't easily gleaned from HMRC website. We're not in anyway trying to evade any liabilities, hence the original post, but nor do we want to stop trading, as at present, most of the money we have made is tied up in stock.
How does one 'notify the revenue'of the start of a business? Is there some sort of declaration form I need to source and send off, or do I just address a casual letter "Dear Mr Darling" and send it to number 11?
I've been on a PAYE scheme with the same employer for almost 30 years. I look at my coding once in a while to make sure it's OK ( ie the same as my colleagues in similar circumstances) , but other than that I don't think I've had any personal contact with HMRC since I filled my MIRAS form in 25 years ago.
We appear to have fallen at the first hurdle, as it's more than 3 months, in fact nearer 6, since we started buying stock. So do we 'fess up and hope we don't get sent to jail,
or do we need to negotiate with the revenue and agree a start date less than 3 months ago? I realise that ignorance is no excuse, but we didn't envisage this going the way it has. What you've told me this morning isn't easily gleaned from HMRC website. We're not in anyway trying to evade any liabilities, hence the original post, but nor do we want to stop trading, as at present, most of the money we have made is tied up in stock.
How does one 'notify the revenue'of the start of a business? Is there some sort of declaration form I need to source and send off, or do I just address a casual letter "Dear Mr Darling" and send it to number 11?
I've been on a PAYE scheme with the same employer for almost 30 years. I look at my coding once in a while to make sure it's OK ( ie the same as my colleagues in similar circumstances) , but other than that I don't think I've had any personal contact with HMRC since I filled my MIRAS form in 25 years ago.
You can notify by phone these days. The number is in the phone book.
Regarding the actual date of commencement of the trade, this can be selected from a number of different dates, whichever was the earliest -
the date you set up the business formally (this may not have happened in your case)
the date the partnership agreement was signed (if there is one - strongly recommended for partnerships)
the date the first "stock for resale" was purchased
the date the business bank acount was opened
the date "capital" was injected by one or both partners
the date the first sales invoice was issued to a customer
the date the first business related assets were bought
The Revenue won't throw you in jail, but they could fine you £100 for late notification.
Regarding the actual date of commencement of the trade, this can be selected from a number of different dates, whichever was the earliest -
the date you set up the business formally (this may not have happened in your case)
the date the partnership agreement was signed (if there is one - strongly recommended for partnerships)
the date the first "stock for resale" was purchased
the date the business bank acount was opened
the date "capital" was injected by one or both partners
the date the first sales invoice was issued to a customer
the date the first business related assets were bought
The Revenue won't throw you in jail, but they could fine you £100 for late notification.
Edited by Eric Mc on Wednesday 7th January 12:00
Eric Mc said:
You can notify by phone these days. The number is in the phone book.
Regarding the actual date of commencement of the trade, this can be selected from a number of different dates, whichever was the earliest -
the date you set up the business formally (this may not have happened in your case)
the date the partnership agreement was signed (if there is one - strongly recommended for partnerships)
the date the first "stock for resale" was purchased
the date the business bank acount was opened
the date "capital" was injected by one or both partners
the date the first sales invoice was issued to a customer
the date the first business related assets were bought
The Revenue won't throw you in jail, but they could fine you £100 for late notification.
Thanks for that info EricRegarding the actual date of commencement of the trade, this can be selected from a number of different dates, whichever was the earliest -
the date you set up the business formally (this may not have happened in your case)
the date the partnership agreement was signed (if there is one - strongly recommended for partnerships)
the date the first "stock for resale" was purchased
the date the business bank acount was opened
the date "capital" was injected by one or both partners
the date the first sales invoice was issued to a customer
the date the first business related assets were bought
The Revenue won't throw you in jail, but they could fine you £100 for late notification.
Given what I've said, and the fact that we're declaring, rather than waiting to be found out, in your experience, how likely are we to be fined ?
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