Running a legitimate and legal workshop from home.

[Keith 66]

If you are self employed you or your accountant acting on your behalf should or will have registered you with HMRC for tax purposes. Some people do it themselves others like me get the accountabt to do it as they know the ropes.

A cautionary tale from back in 1984, i went self employed & into partnership with a friend of my parents. He recomended we use his existing accountant, effectively he was a sleeping partner. For three years i paid the accountant to do his job. One day a red bill from the tax man drops on the mat. At the time it was over 2K which was a bit of a shock.
My wife was doing book keeping evening classes & asked the advice of the Gent (good accountant) doing the teaching, he said phone up HMRC & ask for your ID number.
We did so & they had never heard of me.
We ended up with the Gent, redoing 3 years books & getting me off the bill completely. It would seem that because the buisness had made a profit that this profit would have pushed my partner into a higher tax bracket, So his accountant just didnt register me or file my return at all.
I doubt it would be possible for the accountant to do this today.
The partnership split & i had to buy the bstard out.
The moral of the story is never go into buisness with a christian!

 

[snowcat]

To the OPs original question, most can get away with the planning issue, If there sensible, don't make too much noise mess etc, and get on with the neighbors, the worst the council can do is put an enforcement on you to stop, often this is never even upheld but they do it to stop a legal right being made, (ie the 5 year ruling as is now). Rates and planning departments do not speak, so chances are even if one catches up with you the other doesn't.

I know the rules fairly well as I let quite a few buildings.

On the HMRC front, no doubt about declare your income and pay tax on it, the route may be either as a LTD company or as sole trader and or partnership, all have good points and bad points from a tax position.

Also I pay insurance for the Cost of a tax investigation, with our books that could cost around 50K, Its costed per turnover/profit so well worth haveing, I was investigated Mid 90s, It took 12 months and they found little, Its still a very missrable expearance.

If your working for the public, keeping under the VAT threshold is always good, adding VAT makes you 20% less competitive than joe bloggs down the road, and a cottage business with smallish Inputs gains little from a registered position, You will be better judged on the pros and cons of this anyhow by the time your business grows for the threshold on VAT.

Insurance, PL is a given these days, Don't forget with insurance for things like tools your only get the value of the tool, not the replacement value, so a five year old bit of kit is worth that, old for new policy's are hard to come by and probably more expense than its worth on tools, I always look at Insurance like this, would losing my tools/Truck/Building etc push me under if I was under insured, with me it wouldn't however a large legal claim would, so I make sure I have a decent PL and business combined policy and moderate building and tool insurance.

You can insure for whatever you like, but costs always become a factor, like everything in business its just one big balancing act.

 

[rtbcomp]

...........When people say about registering your business, what do they mean, and registering whith whom?

Dan

Just tell HMRC you're self-employed, you'll already be registered with them if you pay tax and fill in a self-assessment form &c.

If your turnover exceeds a certain amount (I forget how much, but your accountant will let you know) then you have to register with HMRC for VAT, again it's a simple process.

There are other registrations, for example if you are a scrap-metal dealer you have to register that with your council. You probably have to do so if you're a child-minder, dealing with food &c. If you handle other people's waste (or your own building waste) you have to get a waste carrier's licence.

 

[Gritineye]

It's a good idea to ask any other sole traders you know if they have a good local accountant they can recommend, you do need to 'get on' with your accountant, so take your time choosing one.

I don't remember the details, but my accountant (who had just left HMRC and started up on his own working from his garage at the same time as me) told me the most tax efficient date to declare myself self employed, this got me a substantial rebate that I might have missed without his advice.

I stayed with this accountant all my business life, I may have been just lucky as other small traders I know didn't choose so well!

 

[Wallace]

Remember that being self employed does not mean you have to employ an accountant. If you are starting out from home on a small scale keep good records and all your receipts, accountants are often an unnecessary expense. HMRC phoned me to offer help after I registered and they will help you if asked.

 

[rtbcomp]

That's a good point. You only need to provide profit & loss, you don't need to produce a balance sheet, unlike a limited company.

In my current business I use a spreadsheet with the columns representing the boxes on the tax return, including personal income such as interest and pension. It takes me about 30 mins to submit my tax return online.

 

[Coppers Lot]

I don't remember the details, but my accountant (who had just left HMRC and started up on his own working from his garage at the same time as me) told me the most tax efficient date to declare myself self employed, this got me a substantial rebate that I might have missed without his advice.

I agree, when I took early retirement I was also told to retire in June as that is when you hit the years full NI contribution, for accounting purposes.

Remember that being self employed does not mean you have to employ an accountant. If you are starting out from home on a small scale keep good records and all your receipts, accountants are often an unnecessary expense. HMRC phoned me to offer help after I registered and they will help you if asked.

Yes, When I had a Limited Company, my accountant was used at year end only and only charged for that.

That's a good point. You only need to provide profit & loss, you don't need to produce a balance sheet, unlike a limited company.
In my current business I use a spreadsheet with the columns representing the boxes on the tax return, including personal income such as interest and pension. It takes me about 30 mins to submit my tax return online.

Could you possibly share the blank of that please RTB? I would love to see it.

 

[rtbcomp]

....

Could you possibly share the blank of that please RTB? I would love to see it.

It's nothing special. Just go through your tax return, note which fields you have to fill in and make each one a column, e.g. I have columns for

Date
Details
Business Receipts
Business Expenses
Business Mileage (miles x £0.45)
Pension
Taxable Interest
Tax free income (Premium bond winnings, ISA, Prizes &c&c)

I have another spreadsheet to calculate depreciation on plant & machinery.

Each column is totaled at the bottom and some basic calculations made, e.g.

Profit = Business Receipts - Business Expenses - Business Mileage - Depreciation

I also project my profits:

Projected Taxable Income = (Profit to date + taxable incomes)*365/(No of days into current year)

This is useful near the year end e.g. to help me decide whether to buy some more consumables, hire a skip &c&c now or wait until the new year, or to set cash aside to pay tax.

 

[Coppers Lot]

Excellent, thank you.

 

[rtbcomp]

A slight variation -

If you have tax deducted at source you'll need a column for (Interest Before Tax), (Interest After Tax) and subtract the two to arrive at (Tax Paid). If you don't hit the tax threshold you'll need to claim this back.

 

[rtbcomp]

Another point.

I don't hold any stock, so don't need to account for stock changes.

The difference between opening and closing stock values affects your profit/loss.

If you have more stock at the end of the year you need to add the difference to your income, less you have to subtract it.

 

[Coppers Lot]

Sounds like the ideal business.