Not working to self-employed - tax / law implications?

Question

Hello, I'm in serious need of some advice. Hope you can help. My situation is this: due to various reasons I have been unemployed for over 4 years. During this time I have been supported by my partner and also my mother. I have also traded a little on Ebay which has provided a little income but certainly nothing above my tax threshold (if I had been declaring this income). Briefly about 3 years ago before my partner and I moved in together, I claimed housing benefit which I was entitled to at the time. I did not receive income support as the housing benefit was based purely on the support I received from my mother. I think I received this for no more than a few months.

My situation is this: I want to increase the amount of trading I do on Ebay as I have realised that I should be declaring any profits as income. (For a long time I genuinely believed that selling a few of my things and stuff picked up cheaply elsewhere was nothing to do with the IR). I have some ideas on turning it into a successful little business and want to do everything by the book but I am very wary of the implications of doing this.

My questions are:

How do the IR treat people who suddenly appear as self-employed following long periods "off their radar" (eg not employed or claiming benefits)? Am I more likely to be investigated? What evidence do they require of personal income/spending before registering as self-employed? What if I cannot provide full evidence due to closure of bank accounts, loss of statements? How serious could it potentially be or am I getting my knickers in a twist? Is there anybody who I can discuss these matters with in confidence? Is the IR understanding when people are up front and honest with them?

Basically, what is the best way of me moving forward, staying in people's good books and starting a business with confidence that nobody will pull the rug away after I declare my first tax accounts. It has been a very difficult few years for me personally and I cannot bear the thought of problems caused as a result of wanting to do something positive.

I will be very grateful for any help and advice. Thanks, Jane

AK · Accepted Answer

The IR are actually very helpful. If I were you I would make an appointment at your local office and say that you are thinking of starting up an online retail business. Ask them to advise you on what you need to do, they have hundreds of books and leaflets that will help you. They are not out to catch you out, just be upfront and they will tell your everything you need to know, including what you can claim to offset you tax liability eg. your computer etc.

Phil Thompson · Answer

technically we're all suposed to keep N years of evidence for tax purposes (N=6 ?) but its not likely to be an issue.

You won't just declare profits, you will declare income and then offset it with expenses - not only the stuff you buy to sell but also the internet connection costs etc. Capital allowances on hardware necessary for your business are also

the latter, mainly.

an accountant, but it'll cost you. You could also try your local Business Link

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where you will get free advice and some of the advisers are retired bankers, accountants etc. The inland revenue are helpful and roaming round

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should be instructive on its own - if not there are helplines like 08459 15 45 15 open 8am-8pm

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generally, they would rather you "came into the net" than stayed off the radar. When I started up there were no historical questions, though I had only been out of the system for 2 months.

Phil

David · Answer

A while back I read a magazine article about 'epeddling' and the tax office getting all worried that these tax-free online Arthur Daly's would be getting away with murder.

It depends on how much income you expect the venture to raise. A friend of mine used to sell computer stuff on ebay he obtained cheaply from overseas and from liquidation sales. His average profit on per item was around 40 quid. He only needed to sell ten measly items a week to get £400. As he was previously stuck in McRetail - despite having a degree - he went for ages not declaring a penny of his profits seeing it as moral 'pay back' for lack of decent job opportunities and a soul-crushing job hunt. He's got a better job now though and only does the odd bit of informal ebaying for the odd bit of extra cash.

I'd say don't let the fear of the tax man stop you from going for it.

d.

Not working to self-employed - tax / law implications?

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