No Incentive for small business start up

[cumbriasteve]

Well, It's a quiet morning with my first coffee of the day so I just thought I would share my views of why many people don't even make the effort these days to be self employed:

I was lucky due to a generous severance payment to take early retirement last October, not wanting to be idle I spent £2000 on equipment (Portamig, bandsaw, bar bender etc) and began making ornamental steelwork.

All went well and orders sent all over the UK and even a couple to Europe, not making a fortune but a nice paying retirement hobby.

I had declared the business to H&M Revenue, wanting to 'do it right', now due to my severance payment they are demanding 40% tax rate for last year and this year and if I continue my small company pension will also be hit at 40%, I have also been told I must pay NI again, I have paid over 40 years and you only need 30 for full entitlement.

I have letters arriving weekly regarding tax, altering my code each time and I have now calculated I have overpaid by a large amount.

I fully accept I should pay tax and if it was 20% then I would not be complaining, they have stated I have a high income due to the severance payment, I agree it is this year but that amount has to last 5 years until the state pension kicks in, I am not entitled to any benefits due to my savings etc, something I have worked over 40 years to have.

The result is I informed them this week I had closed the business, it is simply too much hassle and too much of a hit on my principles to hand over 40% of what is in reality a small profit for lot's of hard but enjoyable work.

Another impact is the fact there is a young neighbour, think he is about 14 who had shown an interest in the work, for a bit of pocket money I initially trusted him to bend bar and scrolls but last week began teaching him to weld, he was doing really good and has a flair for the work, I even had the thought he could take it over in perhaps 5 years time, not having anyone to hand it down to, he could have been self employed and perhaps even employing others.

I know there are several ways around all this, buy tooling against tax, employ an accountant to help fiddle the system etc etc but I just can't be bothered anymore, it's easier to stop altogether and get them off my back.

Well that's my early morning gripe over with, some will understand, some I am sure will not agree.

Now need to find some restoration projects to fill my time

 

[GrahamGKD]

Really sorry to hear you have had all that bother Cumbriasteve. Not much help to you now but may be of interest to others - I 'washed' the taxable element of my severance payment through my pension scheme and took it straight back out as a lump sum from the pension, which effectively made it free of any tax. This was a service offered by my pension provider so must have been fully above board. It worked in my case because I wasn't planning on taking any other lump sum from the pension and the amount of severance I washed through was below a certain threshold against my pension fund as a whole. I don't think this would work for you now but in any case I would have thought it might be worth you having a chat to an Independent Financial Advisor to see if there are any other options?

 

[danelectro]

Steve, you're dead right, there is no incentive what so ever.

I think if I were you I'd stuff them, get a good accountant and get him to sort it. A good one will be well worth it.

 

[piman]

Hello Steve,

the revenue system is hugely complicated, so it's no surprise that HMRC are top of the league for errors. Personally I feel an accountant is essential and in our experience saves us more than his fees cost.

There is no doubt that red tape and officialdom is a great restriction, especially for new businesses. We planned a small building extension and planning went through relatively normally, about 3 months. Building regulations however took ages to respond and whne they did they asked for some alteration. OK, sent the plans back to comply and they came back requiring another change, this happen a further time after the second was dealt with. That is incompetant in my view as all issuses should have been listed in the first instance. At no time was a site visit made to assess what exactly we wanted to.

David Cameron said his intention is to reduce red tape, especially for new businesses, but overcoming the inertia of officialdom is a monumental task and I doubt if any real changes will come of it.

Alec

 

[cumbriasteve]

Really sorry to hear you have had all that bother Cumbriasteve. Not much help to you now but may be of interest to others - I 'washed' the taxable element of my severance payment through my pension scheme and took it straight back out as a lump sum from the pension, which effectively made it free of any tax. This was a service offered by my pension provider so must have been fully above board. It worked in my case because I wasn't planning on taking any other lump sum from the pension and the amount of severance I washed through was below a certain threshold against my pension fund as a whole. I don't think this would work for you now but in any case I would have thought it might be worth you having a chat to an Independent Financial Advisor to see if there are any other options?

I don't think that option was available, it was a massive severance thing at Sellafield Nuclear site, there was 600 of us and a very strong union looking after our terms, all sorts was looked into and the best option was to defer an amount for this year...hence I am again in a high tax bracket for the 20110 to 2912 tax year.

I know I am lucky to be able not to work and be secure financially, it's just annoying when a new venture is sucked into the same conditions with such a short term view.

 

[cumbriasteve]

Duh... 2011 to 2012 I meant..more coffee needed

 

[cumbriasteve]

Steve, you're dead right, there is no incentive what so ever.

I think if I were you I'd stuff them, get a good accountant and get him to sort it. A good one will be well worth it.

I did think of that but to be honest I have had enough, will enjoy my retirement without the hassle of accounts.

 

[cumbriasteve]

Hello Steve,

the revenue system is hugely complicated, so it's no surprise that HMRC are top of the league for errors. Personally I feel an accountant is essential and in our experience saves us more than his fees cost.

There is no doubt that red tape and officialdom is a great restriction, especially for new businesses. We planned a small building extension and planning went through relatively normally, about 3 months. Building regulations however took ages to respond and whne they did they asked for some alteration. OK, sent the plans back to comply and they came back requiring another change, this happen a further time after the second was dealt with. That is incompetant in my view as all issuses should have been listed in the first instance. At no time was a site visit made to assess what exactly we wanted to.

David Cameron said his intention is to reduce red tape, especially for new businesses, but overcoming the inertia of officialdom is a monumental task and I doubt if any real changes will come of it.

Alec

Tell me about it, I am replacing the tiles on the roof, exactly the same thats on...new building regs now state I have to have permission and someone comes to inspect the new tiles...the cost for that is £98, doing next door at the same time and they see it as 2 renewals so will get 2 lots of money for a 10 min 'look'

 

[Shox Dr]

get an accountant it will cost 300-600quid and well worth it.

 

[Justme]

If you profit from self employment is under about £5K you can claim a low earnings exemption from paying any NI payments at all.

Get form CF10 from HERE

 

[jugs]

The revenue system is too complex for small & one man bands, it's been designed for company's of 200+ workers & multi million £ turn over. Honest people want to get on with the job & can't/won't keep up with the bureaucracy, so get clobbered.

Result is they start fiddling either with or without the help of an accountant, that = loss of tax,
so the revenue system becomes even more complex, & you get even more fiddling = greater loss of tax & the vicious circle continues.

pieman;
the revenue system is hugely complicated, so it's no surprise that HMRC are top of the league for errors.

When we ran our business we couldn't understand a piece of legislation nor could our accountant (& he was good) so got on to HMRC ended up with 3 totally different interpretations ( 2 on tape & 1 in writing) Sent a letter refusing to comply with that piece of legislation, almost immediately got a "heavy visit" & threat of prosecution, when we told the inspector that his department was about to be investigated by a parliamentary committee he turned white & became very nice, no more probs - they went after someone easier.

 

[s410man]

If you profit from self employment is under about £5K you can claim a low earnings exemption from paying any NI payments at all.

Get form CF10 from HERE

thanks for the link

sorry for the hijack but do you know any other regulations which would be helpful towards a new metalworking business such as grants etc

thanks

 

[mike os]

s4

have a chat to careers wales

 

[cumbriasteve]

get an accountant it will cost 300-600quid and well worth it.

Not going to bother now, just had enough of the hassle and don't need any of it, if I was dependant on a wage from the business I would of course go down this route.

 

[cumbriasteve]

If you profit from self employment is under about £5K you can claim a low earnings exemption from paying any NI payments at all.

Get form CF10 from HERE

Yes I found that out when I complained and they sent me a form which I filled in and sent back a month ago...not heard anything yet..it's just the feeling that there are vultures sitting waiting to swoop down as soon as you get off your **** and do something in this country.

I now have an idiot contacting me to say his item must have been lost in the post, he has used the e mail addy that is on the flyer in the package I sent him, no chance of him knowing it from anywhere else... he is going to get a reply that is so hot he will need a fire ext to stop his PC melting.

 

[hareng]

other regulations which would be helpful towards a new metalworking business such as grants etc

Grants vary with each council, where i am nothing, but travel either way across the border less than a mile could have £500 - peanuts or up to £4k in other direction.
Business plan has to be approved as well, so no guarantees.

I would think theres some sort of severance with the OP, so effectively two lots of earnings.
Was told 8% of profits you make by HRMC, forgot the threshold.

 

[s410man]

s4

have a chat to careers wales

in my experiance they have been s**t

we had one in school and even though ive wanted to do the same thing since i can remember she still wanted me to keep my options open such as the army and something else whcih was completely off topic to what i wanted to do yet careers that were similar to metalworking such as engineer mechanic welder etc she didint give me no info on

she then tried to book me a interview for my college and booked it for hairdressing which i told her to change but she then booked it for agriculture not ag engineeering

so my opinion is they arent worth bothering about although there are other companys out there that can be very helpful

thanks

 

[rtbcomp]

When I first set up in 1985 there were loads of advisory bodies and grants available (on paper) but when I went along their sole purpose seemed to be to dream up reasons why they couldn't help.

 

[lazydog]

I got made redundant a couple of years ago and drew on a private pension intending to chill for a couple of years before doing anything with regards to earning,problem 1 they want to tax me on my pension at 18% on a small pesion that works out at £65/wk!
looking at getting a grant to start up a car renovating business and there is nothing so just do it as a hobby at the moment building up contacts,still time another 6 years before i properly retire and i dont think i ever will boredom will kill me!

 

[cumbriasteve]

I got made redundant a couple of years ago and drew on a private pension intending to chill for a couple of years before doing anything with regards to earning,problem 1 they want to tax me on my pension at 18% on a small pesion that works out at £65/wk!
looking at getting a grant to start up a car renovating business and there is nothing so just do it as a hobby at the moment building up contacts,still time another 6 years before i properly retire and i dont think i ever will boredom will kill me!

I wish you luck but advise you to look into it very carefully as a business, it's scary how much official pressure there is, when you start adding together income tax, national insurance, third party insurance, accountants, rates etc etc and see all the official letters you will get you may think twice.

If you can afford to do it as a hobby thats the way to stay..unless of course its a paying hobby, then it becomes a business and you have to inform H&M Revenue within 3 months or be fined and probably get a ridiculous tax demand to teach you a lesson.