Sole Trader Back Dated Registrarion to pay NIC

[Kotake]

Hi,

This inquiry sounds silly though I need your advice.

I have been running my limited company since Jan 08 - officially incorporated in Jan 08, and there was pre-launch period when I was struggling by making trial & error to develop this business.

That pre-launch was June 07 - Dec 08, and actually I earned small amount (less than £1,500 throughout this period), while I didn't register my business at all, thus I didn't pay even NIC Class 2.

My question is that is it possible to register as sole trader by back-dating and pay NIC Class 2 (I'm sure this is all what I owe, given the small earning)? Then do I have to pay any penalty?

I really would like to do because:
- surely I want to pay what I should pay
- I don't want to have my employment break (non economic activity period) from visa extension standpoint.

Would appreciate anybody's help.

Thank you.

Kotake

[pawncob]

If you register you'll incur a penalty.
If you just want to cover the missing contributions, make voluntary contributions. They are at a higher rate than Class 2, but it's only for a short period.

[Kotake]

Hi pawncob,

Many thanks for your prompt response.

Can this voluntary contributions make me have any form of official proof of payment from HMRC that can be an evidence of my economic activity during that period?

[pawncob]

Voluntary contributions are as described. They are not based or dependant on any income sources and hence do not provide any form of evidence to anyone.

[Kotake]

I see,
then if I need evidence of NIC Class 2 payment that proves my economic activity, the only way is paying penalty by registrating back-dated, correct?

Would you have any idea how much the penalty is (I was looking around HMRC website, and the only I can find regarding late registration penalty is VAT)?

[pawncob]

the penalty is £100, but limited to tax due.

http://www.hmrc.gov.uk/selfemployed/iwtregister-as-self-employed.htm

[RAL]

That pre-launch was June 07 - Dec 08, and actually I earned small amount (less than £1,500 throughout this period), while I didn't register my business at all, thus I didn't pay even NIC Class 2.

My question is that is it possible to register as sole trader by back-dating and pay NIC Class 2 (I'm sure this is all what I owe, given the small earning)? Then do I have to pay any penalty?

Did you declare this income of £1500.00 via your self assessment form?

If not, then you should have inform the HMRC by 05/10/2008 for the earning from June-07 to 05/04/2008 and should have paid tax by 31/01/2009.

Penalty for not registering and not paying Class 2 is £100.00.

Penalty for unpaid tax at 31/01/2009 is upto 100% of tax due, interest will be payable until the tax has been paid.

Did you have any other income during this period? If not, then penalty is restricted to tax payable.

[Kotake]

Hi pawncob & RAL,

Many thanks for your advices.

My last time self-assessment didn't include this unregistered sole-trader business because I hadn't earned anything from this business during June 2007 - 5 April 2008 (my £1,500 earnings occurred between 6 April 2008 - Dec 2008, which I should declare by Oct 2009, correct?).
Now my concern here is that I didn't even mark "Yes" in the question of Self-employment in the last Self-Assessment because I hadn't earned anything and registered it (the below is the copy of my self-employment section in my last self assessment)
"2. Self-employment - Did you work for yourself (on your 'own account' or in self-employment) in the year to 5 April 2008?: Number of forms: 0"

Do I have to correct this decalaration after I register my back-dated sole-trader business?
Is there any penalty / or do I invite unnecessary investigation?

Appreciate your opinion.

Thank you.

[RAL]

Penalty would as mentioned in my previous post.

There would be a penalty of £100.00 for failing to register as a self employed.

As you said there is no taxable income so no tax due so there should be no tax geared penalty for June-07 to 05/04/2008.

As you were trading, so you should have filed self-emplyed pages of self assessment for tax year to 05/04/2008. You have one year from due date of 31/01/2009 to amend your tax return. So yes, you can amend your tax return before 31/01/2010.

For tax year 06/04/08 to 05/04/09 you have enough time to do your tax return, so as long as any tax due is paid before 31/01/2010, there should not be any penalty.

Every self assessment is subject to enquiry and investigation so you may be investigated may not be. But if you come out clean, provide very good disclosures and information, this will gain you some brownie points.

But if HMRC instigate enquiry into your tax return, and it transpire that you did not declare income, they may decide to investigate further. So there is no straight forward answer.

[Kotake]

Hi RAL,

Again, many thanks for your comprehensive explanation.

My last questions.

I just read HMRC guideline saying "NIC Class 2 is exempted if net earnings is less than £5,075", then I'm not liable to pay NIC Class 2 since my earnings is well below that amount, am I correct?
If so, all I have to pay is the penalty of £100 for not registrating, right?
Please confirm if my understanding is correct.

Finally, If I formally inform all these details to NIC & Self Assessment departments respectively, what sort of official evidence that states my sole-trader registration during that period can I receive from HMRC?

I would appreciate your advice.

Thank you.