Setting up as a business

edscdk · 28 Sep 2011 at 12:30

Skidder said:
read this - don't charge VAT because you are not VAT registered - you will not owe the VAT because you are not VAT registered (and have no need to be at your current rate of earnings - doesn't sound like you are likely to turnover more than £73k this year)!

local company charged vat despite not being vat registered.... I think he got in trouble

Skidder · 28 Sep 2011 at 12:30

anksta said:
but don't you have to be VAT registered to claim any expenses at all?

you are not claiming expenses you are incurring them and taking these off your revenue to calculate your profit - the profit is taxable

VAT has nothing to do with this

edscdk · 28 Sep 2011 at 12:32

I work with contractors, they key is to get a GOOD accountant, who will ensure you bill everything possible to the company so you make as little profit as possible...

anksta · 28 Sep 2011 at 12:34

Skidder said:
You're not wrong but you are likely to have fewer surprises if you have a tax account setup alongside your bank account and put say one third of everything you earn in there. Unless you don't expect to make much. What is your targeted revenue amount for 12 months (very roughly)?

Keep in mind your first self assessment will trigger not only the payment of an entire year's worth of tax but also a payment on account for the next period so will be larger than future 6 monthly payments that you make.

If I keep up my current rate it's not going to be much, maybe 12 or 15k.

To be honest this is highly unlikely to be my career, I just started doing it as a way of bringing in some cash that would let me do some other things (I write and am on the radio) so this whole owning my own business thing or whatever really isn't my goal.

I'm moving soon and when I do I'll probably get a part time job and do this just to supplement my income, I think I might just be able to get a job doing it professionally pretty soon so it's really not a long term thing, I doubt I'll be doing it in to a second year.

This is why it's all so confusing to me, I just sort of fell into it and then by the time these questions cropped up I was already pretty far in. Noway I'd be this unprepared if I'd sat down and thought right I'll start up self employed.

Scrutinize · 28 Sep 2011 at 12:34

anksta said:
but don't you have to be VAT registered to claim any expenses at all?

no, as fox pointed out last month, offsetting your business expenses which can be everything from equipment, stationery, computers, software, food, hotels, car, insurance, petrol for business mileage and so on will come off your pre profit gross earnings.

you can even charge a staff overhead when working from home for desk space, heating, lighting, water etc

Freakbro · 28 Sep 2011 at 12:37

anksta said:
but don't you have to be VAT registered to claim any expenses at all?

No, an expense with reference to your business is money you spend to achieve your income.

So say you buy some paper for printing your invoices and on your receipt from the stationers you are charged £5.00 + £1.00 VAT = £6.00 total, then to you your expense is £6.00 for that paper.

Because you are not VAT registered, ignore VAT entirely, just forget about it.

Scrutinize · 28 Sep 2011 at 12:38

anksta, why don't you download the relevant forms and guidance off HMRC as this will explain how you do this very clearly?

an accountant would just help you do it even more tax efficiently

edscdk · 28 Sep 2011 at 12:39

Freakbro said:
No, an expense with reference to your business is money you spend to achieve your income.

If I dont get laid i cannot sell a thing could I calim for hookers?

actually that started as a stupid question, but could you? or maybe exotic dancers for clients ...

anksta · 28 Sep 2011 at 12:39

mrk1@1 said:
no, as fox pointed out last month, offsetting your business expenses which can be everything from equipment, stationery, computers, software, food, hotels, car, insurance, petrol for business mileage and so on will come off your pre profit gross earnings.

you can even charge a staff overhead when working from home for desk space, heating, lighting, water etc

Freakbro said:
No, an expense with reference to your business is money you spend to achieve your income.

So say you buy some paper for printing your invoices and on your receipt from the stationers you are charged £5.00 + £1.00 VAT = £6.00 total, then to you your expense is £6.00 for that paper.

Because you are not VAT registered, ignore VAT entirely, just forget about it.

see these are the sort of things I was talking about in the first place when I made the thread.

Now we're getting to some benefits of this.

I work from home, only travelled to London for work once (don't have any receipts or anything for that although does email count), use the computer and the internet all day so that's power and internet right?

Eat at home, that's food, print the occasional invoice that's paper right?

mattyg · 28 Sep 2011 at 12:40

LOAM said:
If you are self employed you need to register you status within 3 months of becoming self employed.

The 3 month rule has been scrapped now.

If you charge VAT without being VAT registered Buy some soap on a rope.

You need to register for VAT IF you turn over the threshold in any 12 month period NOT in a year. There is a difference

I'm VAT registered as I have a fairly high turnover and we spend a fortune on fuel. After saying that though its 20% cheaper than the pump price

I have several bank accounts.
Business
Business vat savings
savings
Private

All monies received from business goes straight into my business account I then transfer the VAT portion into My Business VAT savings account and transfer 25% of the rest into my savings account For MY income tax.

The rest after operating costs is mine. Which I transfer every quarter.

edscdk · 28 Sep 2011 at 12:40

mrk1@1 said:
anksta, why don't you download the relevant forms and guidance off HMRC as this will explain how you do this very clearly?

an accountant would just help you do it even more tax efficiently

just to redeem myself for my previous stupid question...

I think you can get an accountant to do the lot? set up the company do all the paperwork, sure it will cost a few quid but at least its all done right...?

Freakbro · 28 Sep 2011 at 12:40

anksta said:
I'm moving soon and when I do I'll probably get a part time job and do this just to supplement my income, I think I might just be able to get a job doing it professionally pretty soon so it's really not a long term thing, I doubt I'll be doing it in to a second year.

BTW even if you do get a part-time (PAYE) job then you can still do this on the side.

There is nothing wrong in having multiple income streams, from employment & self employment at the same time. Just FYI

Freakbro · 28 Sep 2011 at 12:43

anksta said:
see these are the sort of things I was talking about in the first place when I made the thread.

Now we're getting to some benefits of this.

I work from home, only travelled to London for work once (don't have any receipts or anything for that although does email count), use the computer and the internet all day so that's power and internet right?

Eat at home, that's food, print the occasional invoice that's paper right?

Now your thinking in the right direction, but to define every rule relevant to your situation will get longer and more complicated than we can cover here. Thats what accountants are for, and how we make our living

Participant · 28 Sep 2011 at 12:43

mattyg said:
All monies received from business goes straight into my business account I then transfer the VAT portion into My Business VAT savings account

Out of interest why do you call it your VAT savings account, when you have to pay that to HMRC anyway?

Scrutinize · 28 Sep 2011 at 12:44

anksta said:
see these are the sort of things I was talking about in the first place when I made the thread.

Now we're getting to some benefits of this.

I work from home, only travelled to London for work once (don't have any receipts or anything for that although does email count), use the computer and the internet all day so that's power and internet right?

Eat at home, that's food, print the occasional invoice that's paper right?

you can charge every legitimate cost you incur in undertaking your normal business activities to your business.

this may include entertaining clients at london's finest gentlemen's clubs, taking people out for meals, your food at home during the work day.

you need to keep receipts, however in the absence of these you just need reasonable proof the expenses were incurred

mattyg · 28 Sep 2011 at 12:44

Freakbro said:
Now your thinking in the right direction, but to define every rule relevant to your situation will get longer and more complicated than we can cover here. Thats what accountants are for, and how we make our living

You may come unstook with the food side.

You eat to live NOT eat to work. Especially if you work at home

Freakbro · 28 Sep 2011 at 12:45

edscdk said:
If I dont get laid i cannot sell a thing could I calim for hookers?

actually that started as a stupid question, but could you? or maybe exotic dancers for clients ...

IIRC someone tried this, maybe a journalist claiming it was research expenses?

I think it got kicked out

(cant remember the details tbh)

mattyg · 28 Sep 2011 at 12:46

Robbie G said:
Out of interest why do you call it your VAT savings account, when you have to pay that to HMRC anyway?

Its because you pay your VAT due every quarter.

So I put it into a seperate account so A: I dont spend it B: it gives a few quid in interest

Freakbro · 28 Sep 2011 at 12:46

Robbie G said:
Out of interest why do you call it your VAT savings account, when you have to pay that to HMRC anyway?

Because generally VAT is paid quarterly, so he is "saving" the VAT due ready to pay each quarter, and probably earning a little interest on it.

mattyg · 28 Sep 2011 at 12:47

Freakbro said:
IIRC someone tried this, maybe a journalist claiming it was research expenses?

I think it got kicked out (cant remember the details tbh)

I believe there are new rules regarding what you can spend on each client. Before it looks like a bribe