taxation question

[ruth111]

Hello there.
I'm new to this forum,could you help me ,pls.I have a bussiness idea,but don't know nothing about declaring all the paperwork and taxes.I am self employed with about a 30.000 per year.I want to start second bussiness as buying cars for my cousin,who lives abroad.The cars will go for export and i will get the fixed ammount of money for each car.The thing is,when I will find a car,my cousin will send me money (the car price+my commisions)to my bank account or through paypal.I will use them straight away.Can you tell me how I can do all the paperwork and what records to keep?I don't want to pay taxes on all money comming into my account.How can i show only the comissions?How can I prove the money comming for cars are not my income?Thank you for any advice given.

[mullet]

How can I prove the money comming for cars are not my income?

That money probably should be treated as "income". But you would then pay it out, i.e. as an allowable expense. You are charged to tax (& NICs) on your profit, not on your income. You need an accountant or at least a good bookkeeper.

[pqtaxation]

How can I prove the money comming for cars are not my income?Thank you for any advice given.

Just to expand on Mullet’s comment, the problem you describe is faced by every business which makes or buys-in products it later sells. They solve that problem by keeping accounting records and by using an accounting system which can be on paper (manual ledgers), computerised spreadsheet or computerised ledgers. From this system are generated financial statements such as income (profit and loss) statement and balance sheet required by the tax authorities. You keep the records and you, the bookkeeper or accountant enter information into and produce financial statements out of the system.

You pay income tax based on profits/net income/taxable income of a (unincorporated) business not on its sales/revenue/gross income.

You say you are self-employed currently and have a taxable income (net profit after allowable costs) of about £30k. Presumably you don’t have any alowable costs to set against your gross income so that currently taxable income = gross income.

In your contemplated new business with your cousin, your gross income will be what you invoice him/he pays you (cost of car + your commission on each sale).

Your taxable income will gross income – allowable costs (cars paid for, you’re costs in travelling to see/find car , arranging shipment, ownership paperwork, accounting/bookeeping services etc.).

I assume your cousin will arrange shipment/insurance within UK and export shipment so you will sell the car to him (so ownership will transfer to him) at the premises of the supplier from whom you buy the car.

So after you and your cousin decide to go ahead in principle, ask friends in business for recommendations forand select a local bookkeeping service to help you set up accounting records and an accounting system. Hope your export venture succeeds if you proceed – the UK economy needs successful exporters!!

[RAL]

I recently looked into this one.

What do you mean export? Are you going to sell within EU or outside EU? Have you considered vat? If you carry out this business as a sole trader, you have to charge vat on your existing business turn over too. Also your commission will be subject to vat too. On the same time you can claim the vat charged on car purchase. So As suggested you need to speak to an accountant.

It may be possible you act an agent of your cousin. You buy car on behalf of your cousin and export to him. So you just account for commission as your income.