Can I avoid a sole trader tax return before incorporation?

Can I avoid a sole trader tax return before...

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A subcontractor has been paid monthly since April but wants to set up a limited company, which I've now done.  Is there any way I can bring the income and expenditure for the last couple of months into the company?  It seems a shame to do a s/e for a couple of months. 

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By User deleted
07th Jun 2012 10:40

Gross or net?

If subbie has received payments gross, and we are only talking about one or two months, I might be inclined to show it as company trading activity - not strictly correct, but in reality who is going to bother? It will depend on how much tax and NI is at stake.

If he's a net subbie, with deduction certificates in his own name, that makes it more tricky.

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By The Black Knight
07th Jun 2012 10:41

Of course not!

They are separate entities!

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By petersaxton
07th Jun 2012 10:56

No

Do what is correct not what is easier. The subbie was self employed so he should be treated as self employed for that period.

I don't see what the problem is anyway. It's pretty easy to do.

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By andy.partridge
07th Jun 2012 11:07

There is no doubt in my mind that The Black Knight is correct. You decide if pragmatism trumps accuracy.

In my view it doesn't in this case, one reason being that there doesn't seem to be any evidence that there was an intention to trade as a limited company when the business started.

You say it's a shame. Yes, it's a shame that you were not consulted earlier in the process by the client, and their tardiness might cost them extra fees. Every cloud . . . .

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By Swedish Chef
07th Jun 2012 11:07

Do it right.

To expand on what BKD says, if he has been paid net then the CIS deducted will need to be claimed on the company P35.  This then won't agree with what HMRC have been notified of (as the payments will be under the s/e UTR and not the company's UTR), and then you face a long and drawn out argument explaining why you have done what you have done, which will inevitably delay repayment of any CIS refund due.

I therefore agree with the above posters for the same reasons given.

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By DMGbus
07th Jun 2012 13:29

No and beware...

You can NOT change history.

If money was earned by an individual contractually then that individual should declare said income.

Now, let me say beware for the future... I had a client for whom one customer insisted that he form a Ltd Co - which he felt bound to do - then this particular customer continued to pay him as an individual (but other customers DID pay him as a Ltd Co).  So, I ended up with two concurrent businesses trading ... both a Ltd Co and a Sole Trader - the "easy" thing (short-term) would have been to just prepare Ltd Co accounts but this would have been wrong (especially with 20% tax deductions and reclaim via P35 proceedure).  So with this client I've just had two years of hassle having to draw up two sets of accounts a year for what (in  the clients eyes) was one business.   Currently Ltd Co is dormant and the client trades purely as a sole trader so we're back to normality / simplicity again.

 

 

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By justsotax
07th Jun 2012 13:48

Not sure I would bother with s/e accounts for the

short period - enter into 'other income' (box 16) on basis that this was one off/ad hoc work carried on for 6-8 weeks.  Job done - a tax return would be required anyway but this would make the return simpler by not having to include s/e pages.  You may wish to enter somesome disclosure notes in the info box clarifying the details.  (if CIS taken off this can be entered in main part of tax return too....box 18)

 

Overall tax position should not be affected (if the income fro 2 months was not siginficant....and an appropriate salary in the Ltd for the tax year is paid).

 

This would keep things to a minimum (assuming of course that for the 2 months there was pretty much just the income and some travel expenses)

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By petersaxton
07th Jun 2012 13:48

Customer paying director

If a customer pays a director although the contract is with the limited company then you should account for the transactions in the limited company. The payments received should debit the directors loan account.

The OP was referring to a period when there was no limited company in existence.

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