Unfair competition in the form of the black economy
Discussion
Oh what to do....
Running a business is tough enough as it is and now I've just discovered that a couple of my competitors actually run their 'businesses' as a hobby; don't pay any tax or vat so are effectively 17.5% + 22% + 8% NI better off on each sale than we are!
Now I can either beat them or join them...... any ideas?
Running a business is tough enough as it is and now I've just discovered that a couple of my competitors actually run their 'businesses' as a hobby; don't pay any tax or vat so are effectively 17.5% + 22% + 8% NI better off on each sale than we are!
Now I can either beat them or join them...... any ideas?
I've already done that about a month ago and still no change. Wouldn't be so bad but they've both admitted to me that it's just a hobby and don't pay any tax!
So frustrating.
They say the self employed pound is worth £1.50 of the employed pound.
I say the black economy pound must be worth £3 of the employed pound as they'd probably be pushed into the 40% tax bracket too.
So frustrating.
They say the self employed pound is worth £1.50 of the employed pound.
I say the black economy pound must be worth £3 of the employed pound as they'd probably be pushed into the 40% tax bracket too.
Actually, the Inland Revenue have an unusual atitude to "hobby activities". In their eyes, people take part in a hobby because they enjoy what they are doing and there is a strong likelehood that the hobby will actually COST you rather than earn you profitable income. Therefore, they are happy to ignore hobby type "business" activities as they fully expect the "business" to be running at a loss. In fact, if they are constantly seeing a small business turn in annual losses, they might even insist that the "business" is really a hobby. The reason they do this is becuae bona fide business losses can be usd to reduce a person's tax liability and even obtain tax refunds. Therefore, by insisting that the loss making activity is really a hobby, they will block any loss relief claims.
Obviously, if a business is being run at a profit, then the Inland Revenue will want the tax on the profit.
Obviously, if a business is being run at a profit, then the Inland Revenue will want the tax on the profit.
I do understand your point and sympathise. On the other hand, you know what the government are like, it's all or nothing.
People have to start businesses somehow, that's good for everyone. If you go too mad with taxation on small businesses, and startups, the only way to get going is with a big injection of cash.
Unless you're in the back pocket of the venture capitalists, and they themselves are feeling flush, it's really tough to start up. That's bad for everyone.
If I were you, I'd say the thing you need to do is grow, and outpace them. Isn't that what business competition is all about? If they really are abusing the rules, then shop them. All is fair in love and war!
People have to start businesses somehow, that's good for everyone. If you go too mad with taxation on small businesses, and startups, the only way to get going is with a big injection of cash.
Unless you're in the back pocket of the venture capitalists, and they themselves are feeling flush, it's really tough to start up. That's bad for everyone.
If I were you, I'd say the thing you need to do is grow, and outpace them. Isn't that what business competition is all about? If they really are abusing the rules, then shop them. All is fair in love and war!
I agree dilbert with the point about competition, this is more of a minor irritant - especially when my vat and tax bill arrives.
They've been 'trading' for over two years so it would be nice to know that HM actually show an interest.
My boss of my local chippie got put away for 2-3 years as he was buying potatos for cash but the grocer actually invoiced them out to him.
They've been 'trading' for over two years so it would be nice to know that HM actually show an interest.
My boss of my local chippie got put away for 2-3 years as he was buying potatos for cash but the grocer actually invoiced them out to him.
There is no way that the Inland Revenue would consider an operation with a turnover exceeding £65,000 to be a hobby. It is definitely a business - whether profitable or not.
Also, they are indeed trading over the VAT threshold (currently £60,000 per annum) and they are committing a criminal fraud by not registering.
(All assuming that they really are trading at this level, of course).
Also, they are indeed trading over the VAT threshold (currently £60,000 per annum) and they are committing a criminal fraud by not registering.
(All assuming that they really are trading at this level, of course).
I've done more snooping and it transpires that they have each turned over about £180-200K over the last 3+ years so I got in touch with a very nice customs officer who shared my desk for five hours during an inspection (result, I owed HMCE £16, they owed me £250). He was quite pleased to hear from me and got back in touch within a day for further information. He has promised to forward any news which I will keep confidential (well, within the screen boundries anyway).
I now feel confident that something may be done.
Now, I wonder what happens if you have a job and have been turning over say £70K a year making a profit of £30-45K without telling anyone?
I now feel confident that something may be done.
Now, I wonder what happens if you have a job and have been turning over say £70K a year making a profit of £30-45K without telling anyone?
Well it sounds to me like the competitors are definitely operating outside the law. The IR has full authority to look at their bank accounts without their knowledge - my guess is that will be the next thing they do.
Who knows, if they're forced to pay a hefty Tax bill and start charging VAT, it may well push them over the edge of existence. As such, you may well pick up a lot more customers over the coming months. Good luck!
Who knows, if they're forced to pay a hefty Tax bill and start charging VAT, it may well push them over the edge of existence. As such, you may well pick up a lot more customers over the coming months. Good luck!
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