Advice Self employment and tax shizzle

[old.user4556]

If you declare yourself self-employed and setup your own company (let's say, "Derp Photography"), can you claim back the VAT on photographic items purchased, even the fuel used to go to photography locations? Can you run your company at a perpetual loss just to avoid paying tax on "company" related items?

 

[Sydrik]

Interesting concept, I assume you would have to make some sort of effort to make your photographs commercially available or sell them privately.

 

[Raven]

Not sure about running at a loss but if the equipment is for work then yes you can, however, any money made or services provided would also be VATable so it's not a massive gain really, just an offset.

Depending on how much you sell it may well be cheaper to just pay the VAT and not declare your sales, I think there is a threshold or something that you don't have to declare the tax on sales.

I am not a tax accountant though so best bet is to ask the revenue.

 

[old.user4556]

Yes, lets say Derp Photography took the odd portrait and sold a few landscape shots a year. For argument's sake, you made £500 - surely you would be able to a) get the VAT back on the fuel and equipment purchased to actually make that money and b) if you spent £2000 then you made a loss of £1500 thus paying fuck all tax on the £500 you made?

It can't possibly be that easy? (I don't know enough about self employment though, hence the thread).

 

[Chilly]

You wont get a VAT number with turnover that low else every cunt would be doing it for cheap stuff and blagging the tax man like you want to.

 

[old.user4556]

You wont get a VAT number with turnover that low else every cunt would be doing it for cheap stuff and blagging the tax man like you want to.

Exactly, so how does it work?

Edit: Oh, and "like you want to" - mate, I'm not planning on pulling a tax scam before you get on a high horse.

 

[Chilly]

You start a business, make/lose some money turn some of it over and ask for a vat number. I'm not sure of the exact process after that, though. It's not automated or guaranteed. You'll also get randomly audited at some point - they do it to most people at some point.

 

[Scouse]

You can ask to be VAT registered (it's not mandatory under 50k I think).

And yes. From what I know, I think it will be just that easy.

Edit: I also don't think it would be a tax "scam". It would be legal. As long as your records are in order you wouldn't have anything to worry from an audit.

 

[Gumbo]

If VAT registered you can claim the vat on purchases, but you also have to charge VAT on your sales.

This will of course make everything you sell to non vat registered people effectively 20% more expensive. Which might make you seem pricey, depending on who you sell too.

 

[Tom]

If you make quarterly declarations that low (and you have to insert overall sales and purchases on each VAT return) you'd find yourself being investigated for fraud.

Basically, if you buy a camera, drive around a bit and take some pictures, the VAT man will want to see invoices for that work. If you can't supply invoices, you're in trouble. Lots of trouble.

 

[Raven]

Also, if your returns fluctuate a lot they will also investigate you, which even if you are doing it legit it s a ballache.

 

[old.user4556]

Interesting stuff. I'm reading a lot of threads and blogs on running a small company in addition to PAYE (I'm using photography as an example here because it's something I know about) and to me it does seem open to abuse if you're smart about it. The photography forums are full of small companies (Joe Average Photography) and it's suddenly making sense why.

 

[Gumbo]

Also if you're being completely straight. You can only claim the full vat back for things used exclusively for the business, if you use it for a proportion of personal use, then you can't claim the full amount of vat back, only a proportion of it.

Basically, it's a ballache you don't need until your business is turning over £50k plus. And the other posters are right, if you're constantly claiming vat cheques back from Her Majesty, you're going to get investigated sooner rather than later.

 

[Vae]

Another thing to bear in mind that you might have to try and justify to the Revenue that it is a legitimate business and not a hobby. It can be done - I have memories of one of my old colleagues dealing with a client who suppsedly bred Koi Carp for sale. However all we heard each year was the story of how the Fox or the Heron had ended up eating his prize Carp and he never seemed to sell many if any. Revenue questioned whether it was a real business and took some convincing that it was. I would be surprised if he managed to keep up the pretence for many years though.

Also the effort to claim back the VAT and the cost of filing company accounts etc might outweigh the benefits you're hoping to gain.

 

[Turamber]

If the Revenue are not satisfied you are carrying on a proper trade they can force you to deregister. When that happens you have to repay the VAT claimed on any assets that still exist, if it's above £1000 I think.

You can register for Vat with no trading history but usually, if your first claim is a refund, they'll often ask for copies of all your purchase invoices for that quarter.

 

[Bahumat]

Just sounds like you're planning on scamming and you have little clue how to do it. I have no clue how you would do this, but reading Joe publics opinions online is not the to go

 

[old.user4556]

Like I said, if you read my post, I personally am not planning on scamming anyone or the tax man so is prefer it replies weren't of an accusatory tone .

 

[MYstIC G]

Also if you're being completely straight. You can only claim the full vat back for things used exclusively for the business, if you use it for a proportion of personal use, then you can't claim the full amount of vat back, only a proportion of it.

Basically, it's a ballache you don't need until your business is turning over £50k plus. And the other posters are right, if you're constantly claiming vat cheques back from Her Majesty, you're going to get investigated sooner rather than later.

Having had a VAT inspection (and passed without issue) you don't want to touch this shit with a bargepole, especially where proportional use of the item can be brought up.

We chose to stop doing any work through our building company for about 9 months a while ago and ended up reclaiming some small amounts of VAT because we were still paying for regular bills (phone, copier, etc, etc). Suffice to say the day wasted when they came to inspect was an utter ball ache, they went away not having been able to make a single adjustment (which is all their inspectors are after, getting money out of you).

What are you realistically going to claim back anyway mate? If you bought £5k + VAT work of camera kit that's only £1k back which if you sold your stuff for £250 +VAT a go would mean you'd hand that back over if you sold 20 items?

You'd also need to keep detailed records and prepare small business accounts. In addition you'd have to file VAT returns and if you were late with any of these items you'd be open to a multitude of fines and penalties.

Frankly just sell stuff personally for cash / cheque mate and declare on your tax return as necessary, all you'd need then to keep shit logged would be a triplicate book for any bills you draw up.

 

[Zenith.UK]

My folks declared themselves as builders while building their lodges and house so they could claim the VAT back. You're talking about a substantial amount back when spending thousands on planning, design, building materials, contractor's labour time, shipping of prefab lodges from Sweden and so on. When the building work was all done, they converted the business to running the self-catering lodges and deregistered from VAT. Their annual income is below the £50k turnover where you have to register for VAT.

Serious answer to the OP. Don't even TRY your luck with HMRC. Those people are literally hounds and can smell a scam a mile off.
Not only that, having to do a tax return every year is a ballache, even if you have a regular job with PAYE. You've got to account for everything.

 

[Job]

It's not really that difficult, I've done one year myself.
VAT is a 64k threshold but you can opt in, of course I don't, that extra 20% kills your competivness with the general public who aren't bothered about 'image' and can't claim it back themselves.
20% could literally be my wages on a 2 grand boiler install, fucking madness.

 

[Vae]

My folks declared themselves as builders while building their lodges and house so they could claim the VAT back. You're talking about a substantial amount back when spending thousands on planning, design, building materials, contractor's labour time, shipping of prefab lodges from Sweden and so on. When the building work was all done, they converted the business to running the self-catering lodges and deregistered from VAT. Their annual income is below the £50k turnover where you have to register for VAT.

Serious answer to the OP. Don't even TRY your luck with HMRC. Those people are literally hounds and can smell a scam a mile off.
Not only that, having to do a tax return every year is a ballache, even if you have a regular job with PAYE. You've got to account for everything.

I think, but it's been a while since I was involved in this, that in your parents case it's fine that they deregistered for the trade of running the lodges but this might mean that the buildings themselves might have to be sold on with VAT charged when they are eventually sold. It might not matter if they sell the business as a whole but it is a bit of a danger area.

 

[old.user4556]

Jesus, I think dealing crack is less of a headache.

 

[Wazzerphuk]

Why do you think young people can't be arsed to set up businesses these days? Oh yes, the 30,000 hoops to jump through.

 

[old.user4556]

True true.

 

[Gumbo]

You can still set up the business, it's just that VAT is a pain in the arse. For my £300k turnover business, I set aside 3 days a quarter to prepare for each VAT return. That's mostly tidying up the accounts, reconciling bank accounts etc, but it's still 12 days a year when I'm not earning money, just working out how much I have to give to HMRC for the current government to waste on some bollocks.

It's also entirely depressing to see just how much they get for doing very little for me, everytime I sell something or provide a service.

If you're largely business to business, then register for VAT as soon as you can. If you're largely supplying the public, then avoid it for as long as you can. Just don't get caught out when your turnover exceeds the threshold.

 

[MYstIC G]

Why do you think young people can't be arsed to set up businesses these days? Oh yes, the 30,000 hoops to jump through.

Well actually I'd say it is more down to the fact that HMRC have viciously attempted to remove every single benefit to being in business. Stuff like paying family for minimal work because it reduced the tax liabilities, etc.

 

[Zenith.UK]

I think, but it's been a while since I was involved in this, that in your parents case it's fine that they deregistered for the trade of running the lodges but this might mean that the buildings themselves might have to be sold on with VAT charged when they are eventually sold. It might not matter if they sell the business as a whole but it is a bit of a danger area.

They are selling the business as a whole.
Anyone interested in 3 self-catering lodges on the Isle of Mull as a going concern?

 

[Lamp]

Saw my accountant this afternoon. Do you want me to look into your tax refund and make sure its all ok...for a nominal fee...Feck off!

 

[MYstIC G]

Saw my accountant this afternoon. Do you want me to look into your tax refund and make sure its all ok...for a nominal fee...Feck off!

If he prepared the tax returns that generated it, ask him if he's seriously proposing charging you a fee for checking his own work.

 

[Lamp]

No...I did my own tax return for that year...The Revenue sent him a copy & he was just trying it on.