Does any one know how critical the three month deadline is for registering self employed.
A new client contacted me a couple of weeks ago.
One of the reasons for contacting me was that he (like many other new start ups) didn't have a clue on what was required and fair enough he has made an effort to find out.
My first concern was that he hadn't registered as self employed with HMRC, which I got him to do there and then. Also for simplicity got him to declare his year end as 5 April 2010. He couldn't recall exactly when he started but thought it was 12 Feb, which is the date he used as his start date and was just within the three month window.
Second concern was that he is using his personal bank account, which fortunately has not been used other than an opening balance on the 12 Jan, business expenses and cash drawings. He has since opened a seperate business account.
Basically what I have done (with the clients OK) is to use the (small) balance in the account as Capital introduced and am entering all transaction throught it as either expenses, income deposits from paid invoices or drawings up to the time his business account is used.
My dilema is that having started to enter these transactions I have come across a lot of fuel invoices for his van (which he does not use for private use) but did use prior to his official start date, when he was running around a lot trying to get business (landscape gardener), plus a few other payments for various bits and pieces for the business. Although it is within his financial year, is it acceptable to claim these expenses as they were incured before he officially went self employed? (as declared to HMRC)
Just to add a twist, he was wrong about his start date, I have also come across a sales invoice that pre dates his declared start date, which also means he was earning as a self employed person before the date he declared and it also put it outside the three month notification time (albeit only about 10 days). Does any one know how seriously HMRC view this? And do they impose penalties?
This all seems a bit long winded, so I hope it made sense!?
Cheers
Bill
-- Edited by Wella on Friday 28th of May 2010 05:38:33 PM
-- Edited by Wella on Friday 28th of May 2010 05:41:52 PM
not sure on the revenue's current stance as they seem to have been going for every penny that they can over the last twelve months.
Personally I think that the revenue will still be lenient though on the late registration but don't quote me on that.
On pre trading expenses I know that they are allowable where incurred wholly and exclusively (and I believe because it's pre trading also Necessarily) for the purpose of the business.
Your clients going to need his mileage log with reasoning for each journey incurred.
At least it sounds as though he's not VAT registered so thank goodness for small mercies!
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
More or less confirmed what I was thinking/ hoping
You are right, no VAT to think about but despite my best efforts he want to go down the exclusively business use on the van route. He admits to not being disciplined enough to fill a log in every time he uses the van.
Actually the 3 month rule no longer exists, official hmrc policy (though few of the inspectors seem to know this now) is that you must inform hmrc 'immediately'. Having said that I think there probably will be leniency, especially since completing the old CWF1 form was mainly about registering for class 2 nics and more than likely your client wil be below the defered limit for the financial year.
Like Shaun says and you have concurred, pre-trading expenses are fine to claim. I personally wouldn't worry overly about the original trade as maybe it was 'testing the water' to see if trade existed!
Morning Rob (was it really 1:05 am when you responded to this?)
Thanks for the info. I like the idea that the pre start date sales invoice could be considered a test piece. It's nice to have a bit of ammunition if it is ever questioned.
