HMRC - Tax

[KevinMc]

Hi

Tax - long story and nothing to do with turning but very much linked but I was on a number of HMRC Tax webinars for being self employed.

Many were asking about does doing craft fairs count as "trading" and the answer was yes it does... I also heard that tax people are visiting such events... hmmmm

Anyone have any views or knowledge on this matter...


Kevin

 

[Walter]

If you are selling stuff with a view to making a profit you are trading. Doesn't matter whether you are Amazon or Fred in a shed.

Whether you are actually making a profit is another matter.

Working for yourself - GOV.UK

If HMRC aren't checking out craft fairs, boot sales and other likely sites for unregistered traders then they should be. I pay my tax and don't see why anyone else should get away with not doing so.

 

[Penpal]

Answer in a nutshell mate from Walter, otherwise you pay your money and take your chances.

Peter.

 

[KevinMc]

If you are selling stuff with a view to making a profit you are trading. Doesn't matter whether you are Amazon or Fred in a shed.

Whether you are actually making a profit is another matter.

Working for yourself - GOV.UK



If HMRC aren't checking out craft fairs, boot sales and other likely sites for unregistered traders then they should be. I pay my tax and don't see why anyone else should get away with not doing so.

Yep totally agree.... with all that I have paid every bit for tax all my working life..

Kevin

 

[BensBespoke]

My understanding is... you can do the odd thing and the income is considered 'inconsequential'

But..... that's open to interpretation and the likelihood being if you are selling on a regular or semi regular basis (especially at trade shows etc...) it would be classed as income.

That said it's not hard to register as self employed and doesn't cost anything apart from the Class 2 NICs which are good value anyway... so you'd be daft not to really.

 

[rayf6604]

My understanding is you are allowed to trade for one year from start up without informing hmrc, in order that you can assess what you've started is viable. It's a luck business man who manages to turn a profit in the first year of start up, and there are perfectly legitimate and legal ways of ensuring you show you're not making a profit. I've been registered self employed and I found the tax return an extremely onerous affair to fill in correctly. I've never made a profit making pens because I always spend every penny I take buying more stuff

 

[silver]

My understanding is... you can do the odd thing and the income is considered 'inconsequential'

But..... that's open to interpretation and the likelihood being if you are selling on a regular or semi regular basis (especially at trade shows etc...) it would be classed as income.

That said it's not hard to register as self employed and doesn't cost anything apart from the Class 2 NICs which are good value anyway... so you'd be daft not to really.

There is not "interpretation" at all.

The facts are there for all to see, Income Tax: Overview - GOV.UK if you earn money from sales of goods then you will need to keep track of those sales and once you go over the threashold you will then be subject to tax, full stop.

There is nothing complicated about paying tax, however, we ourself make it complicated and believe we can earn a few £'S here and there and not need to pay any. WRONG.. whatever you earn if it's above the tax threashold then you will need to pay tax at the set rate.

As for registering for sef employed status, that's the difficult point if you are already employed you can't do that. If you are claiming a state pension you can't do that either.

But remember , even if you are employed paying U.K. Taxes whatever you earn from your hobby will be taxable at the rate of tax you are paying on your employed income..

In general, self employed, declare it. Employed or retired claiming a pension do a self assessment.

The tax office will guide you through what you should be paying then.

Remember, if you get the tax man come knocking they will take whatever funds you have had from sales as "profit" and it's all taxable, regardless of how much it's cost to make the goods..

 

[silver]

I've never made a profit making pens because I always spend every penny I take buying more stuff

Sorry Ray, whatever you have done with the money, purchased more stock or tools then you are increasing the book value of your business.

Be careful what's said on here as this is a social media activities and not closed so if they do a search they would soon come up with this thread.. then you have no legs to stand on.

What I would say is speak to the tax office rather than assuming you don't have to pay, at least that way it's not going to be your fault when they come knocking.

 

[rayf6604]

As for registering for sef employed status, that's the difficult point if you are already employed you can't do that. If you are claiming a state pension you can't do that either.

Unless the rules have changed that is wrong because I have in the past registered self employed and been employed full time. I used to be a domestic energy assessor from 2007 to 2010 whilst at the same time being employed full time. I filled in a tax return just for the self employed bit although I entered my earnings from my employer as well. Back then I always spent my business revenue buying more stuff for the business and I always made a loss so I never paid any income tax on the business. Two of my returns were overseen by a tax inspector who came to my house and helped me fill in the return. In the third and final year before I wound the business up hmrc had stopped sending inspectors out to help and I was left filling in the online return myself and it was nightmare making sure figures were put in exactly the right fields or it made an incorrect calculation. I was so glad to be rid of the business.

As for now, I haven't sold anything this year and I've not made a single thing since last year. Indeed I have no workshop at the moment and won't have for about 18 months

 

[Ratty]

I was quite happy when a couple of local large craft fairs would not allow you to sell unless you showed proof of at least registering for self assessment.
The same goes with Amazon Handmade.
Always happy to pay income tax as the more I pay the more I am earning and it is after all what allows the country function.

 

[silver]

Unless the rules have changed that is wrong because I have in the past registered self employed and been employed full time. I used to be a domestic energy assessor from 2007 to 2010 whilst at the same time being employed full time. I filled in a tax return just for the self employed bit although I entered my earnings from my employer as well. Back then I always spent my business revenue buying more stuff for the business and I always made a loss so I never paid any income tax on the business. Two of my returns were overseen by a tax inspector who came to my house and helped me fill in the return. In the third and final year before I wound the business up hmrc had stopped sending inspectors out to help and I was left filling in the online return myself and it was nightmare making sure figures were put in exactly the right fields or it made an incorrect calculation. I was so glad to be rid of the business.

As for now, I haven't sold anything this year and I've not made a single thing since last year. Indeed I have no workshop at the moment and won't have for about 18 months

Sorry Ray, yes you are correct and you can be self employed and employed at the same time. However with me it was my employer who stated as a condition of employment that I couldn't be self employed at the same time.

 

[Walter]

As for registering for sef employed status. . . If you are claiming a state pension you can't do that either.

Nope I am registered as self employed and claiming state pension.

Tax and allowances in retirement | nidirect

 

[GSteer]

As it's relevant to this thread, some may not be aware of the newer £1000 allowance, which if you don't exceed you don't need to declare:

Income Tax: new tax allowance for property and trading income - GOV.UK

 

[Phil Dart]

This whole tax thing was recently discussed in another thread too.

With respect, it is a nonsense that you can't be self employed if you also derive an income by other means. NHS consultants have been doing it for years. The entire thread is here, http://www.penturners.co.uk/turning-pens/19565-hobby-business.html?highlight=hmrc and below is a copy of what I wrote at the time.

Just to clarify - you don't register the business with HMRC, you register yourself with HMRC for self assessment, as your activities will be classed as self employment. You only need to register the business if it is something more than just you operating as a sole trader, which in the case of most people here is, realistically is likely to be restricted to maybe a partnership. In that case, both (or all) partners need to register for self assessment AND you need to register the business as a partnership.

Whichever route you go down though, you must register before October in your second financial year of trading in order to avoid being fined if you are found out.

If you ARE making a profit, it's worth considering the partnership route. The onus of responsibility, to all intents and purposes is no different to being a sole trader, but it means that for tax purposes, on paper, your profits are divided amongst the partners, meaning that effectively, if there are two partners you have twice the amount of personal allowances. It's worth considering.

I have to tell you now, that a prominent member of this forum, who for obvious reasons I'm not going to name, has within the last two months been investigated for his pen selling activities going back over several years. He has been presented with a bill for over £5000 which includes various fines for not registering for self assessment.

Markets, fairs, forums, ebay, facebook, etsy, websites etc are all public places. It is easy for HMRC to find us all. They are currently having a purge on ebay I'm told. Tomorrow it may be your craft market. In reference to another thread here in the last day or so, registering for self assessment is also an excellent way to discover just how much you DO need to sell your pens for in order to make a profit.

 

[wm460]

Just remember more tax you pay them, the more they will waste.

How many politicians pay their fair share.

 

[rayf6604]

Just remember more tax you pay them, the more they will waste.

How many politicians pay their fair share.

There are plenty of ways that perfectly legitimate to ensure you pay minimal tax. By the time you have put through all the running costs, including heat light and even a proportion of a mortgage if you're using a room in your home, not to mention all the other costs that come with running a business, you may end up paying less than 10% tax on any profit that is left. In many cases there is no profit left to pay tax on.


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[Walter]

There are plenty of ways that perfectly legitimate to ensure you pay minimal tax. By the time you have put through all the running costs, including heat light and even a proportion of a mortgage if you're using a room in your home, not to mention all the other costs that come with running a business, you may end up paying less than 10% tax on any profit that is left. In many cases there is no profit left to pay tax on.

That is a good point Ray. Tax is related to profit not turnover. As Phil said earlier registering for self assessment is a good way to find out how much you really need to sell your pens for in order to make a profit. The "three times kit price" sellers clearly don't pay tax or they would know better.

 

[silver]

Tax is related to profit not turnover.

I totally agree, however if you have not declared any tax or done a self assessment they will take all money taken as profit and not look at the costs to make the goods you sell. I have seen that happen and you will have no leg to stand on unless of course you are prepared to take them on with a legal representation. We all know what that will cost..:

As Phil said earlier registering for self assessment is a good way to find out how much you really need to sell your pens for in order to make a profit.

I totally agree, there is no problem in filling out a self assessment or registering your earnings, if that is below the threashold then you have no issues and can carry on knowing you are legal and above board.

The "three times kit price" sellers clearly don't pay tax or they would know better.

That's also a good point to say that for official none tax payers could well "get by" on the three times kit pricing, however I know someone who is a 40% tax payer that in reality has had to always price her pens to cover for that cost. Try 8 times kit price and she is in the right (ish) territory.

I agree with Phil, read his thread above and take heed. You might think you are below the threashold but there is no better feeeling than knowing you are below it

 

[Walter]

The bottom line is, if you are selling pens for profit then register for self assessment, there is nothing to lose. HMRC will not pursue you for failing to make a profit. However if you are making a profit and not declaring it then be prepared for the consequences and don't brag about it forums and social media, HMRC are active in those arenas too.