Client has loads of income from rents but received a tiny amount for self-employed music exam invigilations fees (2017/18 = £140) (she has passed all of her piano exams).
Original 2017/18 Tax Return showed nil entry for this (Page TR3 - Other Income) due to £140 Trading Income Allowance, but white space disclosed full details (i.e. £140 - £140 = nil).
Client now wants to pay voluntary Class 3 NIC for 2017/18 of £741 (£14.25 per week). However, 2017/18 Class 2 would only be £148.20. Class 2 secures more state benefits.
If client revises 2017/18 Tax Return to show first year of self-employent 6.4.17 to 5.4.18 with profit of £140 (less £140 trading income allowance) and ticks for voluntary Class 2 NIC is there any chance HMRC could or would dispute this. I assume HMRC would argue that the self-employment pages were only completed to secure the lower Class 2 NIC.
I have warned client that she needs to increase turnover in future years, although I have doubts she will want to do a great deal more. I imagine she could start using her piano skills for some self-employed teaching, but I have a feeling she does not want to really get involved.
Have any readers ever had HMRC question whether or not a trade/profession actually existed in this connection, or whether the trade/profession could possibly exist for a whole year with such a small turnover.
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Can't see a problem apart from the fact that the £140 probably should have been shown under self-employment in the first place (less the allowance). I virtually insist that all self-employed clients with very low profits pay the class 2 contribution voluntarily simply to tick off another year of their state pension. I can't think of a better deal than to buy a year's state pension entitlement for £148.
When the original tax return was completed the £140 was treated as sundry income, hence the self employment pages were not prepared.
Why did you do that ? You've made a rod for your own back, effectively saying there's no trading.
I've not done this in a real case as yet but I note that Taxfiler has a box to tick to claim the Trading Income Allowance. Apart from that, you fill in the Trading pages as usual.
Lots of self employed people have had no income or, indeed, losses, from a trade and have still been voluntarily paying Class 2 NI.
It's never been a problem in the last 70 years and it's unlikely to be one now.
Start with BIM definition - Broadly, ‘trade’ can be taken to refer to operations of a commercial kind by which the trader provides to customers for reward some kind of goods or services.
There is no need for her to seek to increase turnover, she is clearly Self Employed, not sure why you would think otherwise
it is not the amount of turnover that is in question when determining whether or not a trade exists, it is the intention of the trader.
If one offers ones services on a Self Employed basis in return for a fee, how could that not be an intention to trade?
You have changed the test - or, rather, removed the requirements for a) operations and b) commerciality of said operations.
I also think that "services" (of this kind) tend to relate to professions or vocations (aligning myself with the OP), although I too have read BIM14010 and accept that some trades relate to services. I'd be happier saying that professions and vocations can exist without income (because I think that's in line with what court cases have decided); conversely less happy to say that there's a trade in those circs.
I see no relevance at all in how the tax return was completed. Either there was a trade, profession or vocation or there wasn't.
If you're not confident in your assertion, of course you should urge your client to pay the higher charge to NI.
That goes without saying.
Without doubt, nobody could argue that the trade had ceased.
The absence of sales did not mean an absence of commercial operations; conversely the presence of sales does not mean the presence of commercial operations.
"Self employed" is defined slightly differently in SSCBA (which may be why NH changed his/her wording in this thread), but your client's attitude cannot be faulted in the 'fair play' stakes.
It would be better for your client not to work!If your a parent registered for Child Benefit for a child under 12 you get Class 3 credits automatically.However,I think that period may now be limited to 10 years whereas under the old HRP rules it was restricted to 20 years.
Apologies for the delay in getting back to you.
You are correct in your assertion.
I wasn't sure of the number of years you could claim/get credits for in these circumstances and the 10 year limit was something I seemed to recall from an article I read some considerable time ago prior to the introduction of the new state pension system.My recall is obviously incorrect as the following link suggests you could get credits for up to 22 years!The 20 year limit was again my recall of the limit under the old Home Responsibility Protection rules but I may also be slightly out there!Sorry I cannot be anymore helpful without further research.
https://www.litrg.org.uk/latest-news/news/170615-you-may-get-national-in...
I have definitely had HMRC arguing about whether a trade exists. Client has 3 small self-employed trades, all reported separately and all made losses for some years while she was employed full time and had little time to focus on growing them. HMRC disallowed loss offsets for those years until she quit her job and 1 business broke even and another made profit (3rd was still loss-making). Then they retrospectively allowed losses back 2 prior years. It all hinged on "evidence of trade", principally that they didn't believe she had an intention to make profits.