Hi all, I've been working on my 'web empire' for awhile now and am ready to make the jump into self employment. I figure registering as a sole trader is the best way to go but am a bit stumped about when to say I started. I could go back years but I've only started earning anything reasonable in the past 10 months. If I back date my start date I know there's a £100 fine if I go more than 3 months but I think because my earnings are less than £4600 in total I can apply to have the fine refunded. That's all ok but the problem I'm having is that I don't have any receipts for expenses going back that far. If I take my purchases into consideration - laptop, monthly internet, camera stuff, operating expenses and advertising I doubt I even come out that far ahead but I haven't kept track. So... I'm wondering if I should back date my sole trader registration 10 months or if I should just start now, or go back three months and try to find receipts. Any advice is great keeping in mind that I'm not talking about huge amounts of money. Thanks, Kirsty
As far as i'm aware theres no refund process for the £100; the Inland Revenue may overlook a certain period of income and not class you as being self-employed during that time; but this only really applies if all you have been doing is selling occasional items, unwanted gifts etc (basically applies to people like casual/personal ebay users, people who run a one-time garage sale etc). The Inland Revenue, really, don't care about your expenses... if you can't provide proof of expenses, then all it means is you can't claim tax relief on them - bad for you, but good for them (because it means a higher official net profits figure). In terms of avoiding getting your wrists slapped for them, what you need to be concerned with is your records of income. With certain equipment (ie your laptop), the date of purchase doesn't really matter too much; as long as you've bought it within the current tax year, and can justifiably prove it is for business use, then you can claim relief on it (note, however, that tax relief for items like this is different from, for example, regular bills... be sure to read up on this for confirmation) - however, without the receipt, you don't stand much chance of being able to claim for it. With tax for sole traders, its all self-assessment, so you could pretty much bullshit your way through it for the rest of your life - however you'd be screwed if you were investigated or otherwise asked to provide extensive proof of your finances - from a legal perspective, the best thing to do is be completely honest about the date you commenced trading; which means taking the hit of the £100 fine and also the loss of tax relief for expenses incurred during that time for which you have no receipts. Personally i'd advise looking into arranging appointments with a solicitor, an accountant and a business advisor to ensure you're fully covered. Just a tip, if you're going to take my advice, look into opening a business account with somewhere like barclays; as some of their packages include free meetings with legal, business and accountancy advisors.
Thanks for your help! All of that is really useful info. It's a bit of a pain in the arse starting all this up but once I get the first year under my belt I'm hoping it gets easier. Inland Revenue run a half day course for newly self employed people that covers a lot of the questions I have so hopefully that will shed a bit more light on the situation.