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Informing the revenue of a new business

Informing the revenue of a new business

A friend is wanting to set up a small landscape gardening business. In May of this year he bought a van and some tools but has not, as yet, carried out any actual work. My query is: should he fill in the Inland Revenue Tax form and state that his business started in May or hold off until he starts getting customers?

What advantages/disadvantages would he incur if he chose either of these options?

I'm only a CIMA Stage 2 so have no idea about Tax but would like to help him out!
Neil Wilcox


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By Anonymous
07th Oct 1999 15:00

Date of commencement to trade
The actual date of commencement of trading activity is a matter of fact in each individual case. In the scenario you state, the acquisition of the van and the tools was preliminary expenditure incurred in setting up the business and does not amount to trading activity. For taxation purposes, those costs will be treated as incurred on the first day of actual trading.
The date of commencement will be the date that your friend finishes preparing and actually starts activities undertaken in the normal course of trading activity, which, in the absence of any other better evidence, would probably be the earlier of the date that he started advertising for business or actually started on a landscape gardening job.
He will be required to complete a self assessment tax return for the year in which self-employment commenced. Each year's self assessment tax return stands on its own and refers to the year in question (eg 1999 refers to 6/4/98 to 5/4/99), although it may also include information and/or claims that affect an earlier year, so there is no requirement to notify commencement after 5 April 1999 in a 1999 tax return.
If no notice to complete a return form is received for the year in which self-employment commences, the last date for notification to the Inland Revenue of chargeability is 5 October following the end of that tax year. The official notication form (CWF1) is also notification for NIC purposes and also for VAT, if relevant. Notification to the Inland Revenue promptly after trading has actually commenced would avoid the possibility of an enquiry into his tax affairs by the Inland Revenue arising from their local knowledge of business activity in the area!

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By Anonymous
07th Oct 1999 23:26

Starting a self-employed business
The start of a business is the time when the decision is taken to get cracking. Much time may be spent in buying plant, preparing adverts, etc. before any "work" is done - but the business has starteed and phone costs, car costs, domestic expenses (not too much) are claimable from then on. Similarly, Writing Down Allowances are claimable from the start date - and the earliewr the start, the bigger the claim. It is best to notify the taxman at an erly stage as, without any evidence of early sales, it may be difficult to support an early start date if the commencement is not reported till much later.

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By squay
08th Oct 1999 02:27

New Self-Employment Notification
I would advise completing form CWF1 as soon as trading has commenced. This form is included in the Inland Revenue booklet CWL1 obtainable from any tax office or enquiry centre. As described above the local tax office may find out through local knowledge and cause difficulties for the trader who appears to be a "ghost" or "moonlighter".

Another good reason to notify on CWF1 is that a class 2 national insurance bill will start accruing from the commencement date. The current contribution is £6-55 per week and the NICO is notoriously slow at processing new traders (I have heard isolated reports of up to a year). Put the nic aside so the means to pay are available when the bill finally comes through. Thereafter the direct debit will kick in.

Finally monitor that monthly turnover for exceeding the VAT threshold. Remember the threshold looks at turnover, not profit!

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