Timing of notification to the IR of self employed income

Timing of notification to the IR of self...

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Can any one offer an insight into how the IR would view an employed individual exploring opportunities in earning additional income through a self employed venture in the evenings offering 'Beauty treatments and massage'.

As I understand the venture is in it's infancy and has not yet provided any services, it is merely dipping its toes in the water to determine the reaction from possible clients. Some home produced flyers have been printed and handed out and a batch of business cards has been printed, all using a home PC and incurring little cost.

My questions are:

1. When is a business a business in the eyes of the IR for tax purposes.

2. What notification is required to the revenue and by when.

3. If in default of question 2 what are the potential penalties.

4. Any other relevant points.

Phillip

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By Sherlock
11th Sep 2003 12:22

several issues
(1) I would have thought that the business commences officially when fees begin to be received. Nevertheless pre-trading expenditure may be able to be claimed for tax purposes.

(2)There are two strands of notification. The individual concerned may be liable for Class 2 National Insurance of £2 a week, and notification to the Contrbutions Agency should be made within three months of commencement, subject to a penalty of £100.

In actual fact, maximum NIC may be already paid through the employment, or a claim for small earnings exemption may be relevant. However, one must go through the correct administration.

Self-employed income is a new source for direct income tax purposes, and the source must be notified within six months after the end of the appropriate tax year. Commencement now would mean notification by 5 October 2004. Using that example, failure to notify could mean a penalty under section 7, TMA 1970 of up to the tax still due at 31 January 2005. If the tax has been paid there is no penalty.

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By barryhallam
11th Sep 2003 12:53

A little bit longer
One small point is that the NIC deadline for notification is three months from the end of the month in which the trade commences - so it can be nearly four months

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