Self employment and tax return

During the Summer of 2006 I had a 2 week stint of being self employed. I had just passed my professional exams, and in the process of looking for a training post I registered with some agencies for work.

I managed to earn about £800, however I had costs such as professionaly body registration, indemnity, transport etc etc.

I informed my local tax office and told them that I was no longer self employed.

I have just realised that I am supposed to send something in to the tax office by jan 31st or I will get £100 fine.

I have received nothing fromt he tax office or a tax return.

What should I do?

Thanks

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Relax.

Keep a note of any conversations you had with the tax office.

Unless you owe some tax for TY 05-06, you cannot be fined for non-submission of 06 Tax Return because penalty is smaller of Tax unpaid at 31 Jan or £100.

If you will owe tax for 06-07 (i.e. including your s/e income for summer

Are registration and indemnity needed for your "proper job", the training post which you presumably have now secured? If so, it might be simpler to set them against income from that.

Transport? Be sure you're really entitled to this. Any travel costs which are essentially in the nature of commuting are not an allowable expense. Travel between home and clients might be OK if you can establish that you are "working" from an "office" which happens to be your home, i.e. that your commute from home to office is a zero distance, and that you visit your clients from the office rather than the home. :-)

For a two week period it hardly seems worth becoming formally self employed. It would have been perfectly OK just to put those earnings (after expenses) on the next tax return under the "miscellaneous earnings" category.

No you aren't and you won't. This month's deadline relates to tax returns and tax payments in respect of the 2005-6 tax year. Anything you earned in sumemr 2006 is part of the 2006-7 tax year.

Sit tight. You will probably be sent a return in April. If nothing comes by June, ask for one.

Martin has explained that there isn't anything to worry about regarding the 31 January 2007 deadline but are you sure you were self employed when getting work through these agencies? Did you get any payslips? Did you send anyone invoices?

Yes Indemnity , and professional body registration are essential for both jobs. I registered with an agency on a self employed basis, and I had to show proof, which is why I rang the tax office who got me registered. The client payed me directly. The travel involved going to clients premises arround London, and involved buying a travelcard for that day, about £10.40 as I was travelling peak time.

What proof did you show?

You retained the travel cards?

The fact that you register with the tax/NI people as self-employed and pay your Class 2 NICs doesn't prove that any particular work you're doing is by way of self-employment, that question is answered by reference to the nature of your relationship with the clients.

As a matter of interest, what profession is involved?

If you were working for different clients, it might make it more likely that you would be deemed self employed.

Did you visit several different premises in one day? Typically the tavel from home to the first, and from the last back home, would not qualify, only the inter-client travel would, unless you could claim to be "based" at home.

But if the most appropriate form of travel between client premises would have involved buying this travel card, and if the ability to use it for commuting as well did not influence that decision, then you were just lucky that you got the commuting thrown in for free and the whole expense can be justified on work grounds.

"Ronald Raygun" wrote

"Wholly & Exclusively" ? :-S

Yes, the issue would turn on whether all the expenditure was incurred W&E for a business purpose, and I'm pointing out that there can be circumstances in which the mere fact that the expenditure has a side effect of a private benefit, that is to say where the provision of the private benefit does not increase the cost, then this would not invalidate the allowability of the claim.

I'm assuming [perhaps incorrectly, in which case I take it all back] that this card is some kind of unlimited-travel day pass for the tube, and its purchase can be justified as the reasonable cost required to provide all of the day's business travel.

If, however, the business travel can be had more cheaply by buying singles, then the difference between the cost of the day pass and the sum of that of the singles would have to be disallowed.

I dare say there could be complications there, for example if it wasn't known at the start of the day how many singles would be needed, and if the day pass was bought in the expectation that it would be cheaper than the singles, but if it turned out that in fact fewer trips would be made that day than expected, what then?

"Ronald Raygun" wrote

What about the similar situation of an "unlimited-talk" phone line rental? [Fixed-cost per month, includes both line rental and all calls.] Can you claim that as W&E business purpose? ;-)

Tosh. E.g. First class travel is allowed, even tho 2nd class will still get you around. And who wants to queue up repeatedly to keep buying tickets?

Incidentally, we're talking a tenner here. Who in earth would even think of quibbling?

You've really answered your own point. Reverse the situation - would HMRC disallow a series of singles just cos a day-ticket might have saved a bob or two. Or the traveller could have bought a "railcard" discount thingy. Or walked ? - god forbid.... :-)

Yes and no, depending on the circumstances.

With phone lines there is a presumption that you would have the phone anyway, for private use, even if you were not running a business from home. In particular, if you had the private phone before the business even existed, that would be a dead giveaway that the purpose would be at best dual.

However, if in addition to the private line you then installed an additional line for the business, the latter's rental would qualify as W&E for business.

Agreed?

Agreed, it's not the cost per se that's the issue. It's the fact that the cost difference can identify a private use component. But:

This is could be enough reason to go for the day ticket even if it is more expensive.

Nobody, if it's a one-off. But this could be happenning every day for months [not relevant directly to the OP, whose entire SE stint amounted to only 2 weeks].

"Ronald Raygun" wrote

Are you saying that taxation is based on assumptions, even if they are invalid? :-(

"Ronald Raygun" wrote

What if you used the same type of travel day pass before the business started? Does that make the travel pass dual-purpose?

"Ronald Raygun" wrote

Of course, just the same as if you bought *two* travel day passes (one private & one business), the latter would qualify W&E. But why would you, when each one is "all you can eat"?

But what if you also made private calls on the business line?

Not at all. Taxation is based on rules, and the relevant rule here is that, to be allowable as a deduction from taxable income, expenditure must be incurred wholly and exclusively for the purpose of the business.

The aforementioned presumption does not directly govern the question of whether the phone rental is allowable, it merely forms the default assessment of whether it is W&E for a business purpose. It would be valid in the vast majority of cases of people working from home, that if they have a phone, it is there for a private purpose as well. It's a similar situation with TV licences. The default assumption is that every house has a telly and so every address should have licence associated with it. But of course quite few people coose not to have one, and so do not have to pay the licence fee. I'd estimate that much fewer people choose to have no phone than no telly. Whatcha reckon?

However, I would say that if it could be established to a reasonable level of satisfaction that the person does not want or need a phone for private purposes (and not having had one prior to starting the business would seem to be pretty convincing evidence in support of this unusual position) then the phone rental would be W&E for business.

No. The day travel pass isn't really directly comparable with having a private phone, because one can change one's travel arrangements much more easily than one can decide to make oneself unreachable by family and friends. Having a private phone is as much about taking calls as making them.

Quite. I'm not sure I'm not coming round to the idea that the pass would be disallowed completely. It's difficult to know where to draw the line between the purpose for its purchase having been wholly for business, but with some private benefit occurring as a "side-effect", and the purpose having been essentially for both.

That's no problem, the cost of the private calls should either be reimbursed to the business or be deemed income, exactly in the same way that business calls on a private line are dealt with. If the tariff deal happens to be such that the cost of making calls is free, so be it.

The question for deciding whether the line rental cost is allowable is whether you had an axe to grind when deciding to incur it.

One should be grateful, I suppose, that there is no "availability for private use" test for phones as there is for company cars.

Because waiting around is time and that's a cost?

Yep, but not just time but also irritation. An unhappy worker is less productive.