How Taxing Does Tax Have To Be?

[1strangefish]

Hi All

Since joining the forum I have worked through C&G 2330 for 3 years, updated to the 17th addition, completed 2391 and finally joined the Elecsa Part P scheme. This forum has been an invaluable source of info and I am now looking to you guys for some help.

This week I will be registering with HMRC as a sole trader (as a second source of income). I have no dogs so will not be registering any off shore accounts just yet, but would like to know what I can claim back on my taxes as a start up and then ongoing.

PM

 

[lkayelectrical]

You can claim back every thing that is used to do your job, things like vans etc you can claim a certain percentage back each year, any questions let me know and I'll get the mrs to type a message out

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Ow forgot to say when I said claim back it's deductect off he profit you pay tax on so saves you 20% or so

 

[SPECIAL LOCATION]

The short answer would be all reasonable costs incurred during the running of your business...

But...

The trick is to identify what things are exclusive to the business....

And what things have joint business & personal use.?

A sole traded based from home often has a lot of joint use items...

So make sure you assign reasonable percentage of costs between private and business right from the start.

or it can get messy at a later date.

If you were opening a shop or small factory unit you would have clear building overheads...

Just because you may be doing some work from home the business still has basic costs of heating, lighting, telecommunications, secure storage space for tools equipment etc...

Be open and honest about real use of things...

If you are buying tools for the business, almost everyone knows that at some stage you may be using them for private use putting up that bedroom shelf.

So dont go saying all tools cost are 100% business when really they may be 95% & 5% private or 90% & 10% private????

HMRC are well aware of typical costs incurred by small businesses.

Or your vehicle costs... very few vehicles are 100% business use only.

Guinness

 

[ProDave]

When you register with HMRC, they will (or at least they used to) send you a large book called "the right way to start your business". That tells you pretty much all you need to know.

If like me, you only work part time at your electrical business and can keep your turnover under

 

[Evans Electric]

And if you do any sub-contract work you will come under the wierd and wonderful CIS Scheme (From which I have recently extricated myself)

 

[ProDave]

And if you do any sub-contract work you will come under the wierd and wonderful CIS Scheme (From which I have recently extricated myself)

What's complicated about the CIS scheme from a subcontractors point of view?

I'm registered with it and when I do subcontract jobs, they deduct tax before paying me. That just has the effect of reducing the tax you have to pay at the end of the year.

I understand from a contractors point of view it is a hassle as you have to submit monthly returns, even if you are not subcontracting anyone, but fail to see what problem it is for the sub contractor.

 

[pewter]

My advice, keep all receipts and get a good accountant.

The money my accountant charges, is less than the money he saves me by knowing what he is doing. I think his bill is also deductible.

I am an electrician, not an accountant. It is easier and better if i go to work for a day as an electrician and pay an accountant to be an accountant. I have a fun easy day at work doing what i do best, and pay another professional to do what they do best. I have a few friends that attempt to do there own. All they end up doing is spending a day or 2 struggling, getting things wrong, and cost themselves.

Most people do not condone the unskilled messing with electrics, i dont know why people attempt there own accounts.

 

[Evans Electric]

What's complicated about the CIS scheme from a subcontractors point of view?I'm registered with it and when I do subcontract jobs, they deduct tax before paying me. That just has the effect of reducing the tax you have to pay at the end of the year.

I understand from a contractors point of view it is a hassle as you have to submit monthly returns, even if you are not subcontracting anyone, but fail to see what problem it is for the sub contractor.

Its a total PITA as a contractor ,which is what I am , peeing and pharting about with bits of paper , send off returns by a certain date , send off payslips and money by another date , keep doing it even if they are zero returns , miss one of those and a

 

[steptoe]

subbing?

can the subby not just give you an invoice then you pay him directly, put it down as expenses to you, and its up to the subby to sort his own tax out?

Ive done that in the past subbing to folks and no problems yet that I know of.

on saying that though, it was merely another source of income on my tax return, dunno if it will still be like that now Ive set up an actual sole trader business......???

 

[Evans Electric]

Stepps , HMRC brought in the CIS ( Construction Industry Scheme ) because they don't trust the industry. So, if you invoice an engineering firm for

 

[NozSpark]

Deke, it seems that you know quite a bit about this.

Does this go for a one off payment to a subcontractor as well??

 

[steptoe]

Deke, thats like the old SC60 situation then [?]

I used to work under that, but every now and then if I done a one off for somebody I would simply invoice them and they would pay me the amount on my bill,

I had to do the tax on it.

what difference does that make to whether you bill the builder or the client direct?

the builder cant tax you on materials can he?

so instead of materials =

 

[NozSpark]

Steps, you have to split your bill into deductable and non deductable parts

So materials, traveling expenses, subbed in labour to you, professional advice, etc go down as non deductable

Where as your labour (and only your labour - you would pay employees under PAYE and you would deduct your sub contractors 20%) goes down as deductable

 

[Evans Electric]

Deke, it seems that you know quite a bit about this.Does this go for a one off payment to a subcontractor as well??

Yes, they said that anyone involved in construction ,with a turnover less than ....can't remember exact.. possibly

 

[ProDave]

As I'm only ever at the bottom of this CIS food chain, it doesn't bother me. But I wouldn't want the hassle of being a contractor and having to do the tax deducting and accounting lark.

The first 2 jobs I did for my builder he paid me gross, but once he realised this was an ongoing thing, he told me go register with the CIS as he didn't think he could get away paying me gross for very long.

AS I say for me it's simple. I just have to keep track of all the tax that's been deducted, fill that into a special box for it on my tax return, and the tax I pay is reduced by that amount that in effect I have already paid.

 

[1strangefish]

Hi Guys

Thanks for all the input. One last question. How far back can I go with purchases to off set on my bill?

ie bought the MFT in 2010

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Makes sense, but I am not expecting large earnings in the first couple of years, so want to keep costs down.

But thanks all the same.

My advice, keep all receipts and get a good accountant.The money my accountant charges, is less than the money he saves me by knowing what he is doing. I think his bill is also deductible.

I am an electrician, not an accountant. It is easier and better if i go to work for a day as an electrician and pay an accountant to be an accountant. I have a fun easy day at work doing what i do best, and pay another professional to do what they do best. I have a few friends that attempt to do there own. All they end up doing is spending a day or 2 struggling, getting things wrong, and cost themselves.

Most people do not condone the unskilled messing with electrics, i dont know why people attempt there own accounts.

 

[ProDave]

Hi GuysThanks for all the input. One last question. How far back can I go with purchases to off set on my bill?

ie bought the MFT in 2010

Strictly speaking, only from when you start trading.

But you bought your MFT as a private purchase.

Perhaps you no longer need it as a private individual, so you could sell it to the company. Don't forget to issue yourself a receipt.

 

[Evans Electric]

Include it in your first tax return and see what happens , plead stupdity .