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Where Taxpayers and Advisers Meet

Do Small Guys get Investigated?

RJUK
Posts: 10
Joined: Wed Aug 06, 2008 3:06 pm

Postby RJUK » Sat Oct 18, 2003 11:19 am

I am a normal guy 9-5 worker, but as I started doing some car repairs out of work I thought I had better register self employed too.

I am upset as to how difficult taxation is for someone like me who works and earns normally by PAYE and then for the odd garage Job I do in the evening becomes a tax nightmare!

My questions are:

I also buy and sell a bit at car boots and a few cars, I was doing this for years before but now I am doing tax return I am concerned that I maybe checked up on.

I do a simple 3 line tax return as under £15K

What are the chances of IR investigating small time self employed like me?

Secondly, when my wages hit 40% tax bracket, this will mean all of my extra money from cars I do up will be taxed at a RIP OFF 40%

Is there another way, other than quit UK?

accountant@uktaxshop
Posts: 550
Joined: Wed Aug 06, 2008 3:04 pm

Postby accountant@uktaxshop » Sun Oct 19, 2003 1:49 am

RJ,

Firstly if you are trading at car boot sales, this is as much a trade as the odd garage job, and should be declared.

In terms of investigation, you are as likely as anyone else to be investigated - and under self assessment it can be very painful if you have not declared everything. Remember you are signing on the form that everything is there - you have no excuses if you deliberately miss a chunk of revenue.

In terms of the higher rate tax, if your total earnings are over £37k for 2003/4, additional earnings will be at 40%. It is worth pointing out you are already paying a marginal rate of 22% income tax plus employees NI of 11%, i.e. 33% on your main income.

In terms of ways around this, it depends on your level of earnings from your odd jobs and car boot sales. You could for example set up a limited company, and earn the first £10,000 tax free. If you are still a lower rate tax payer there would be no taxes on dividends paid out.

However I must caution there are considerable extra responsibilities of doing this, and the administration costs in terms of accounting and tax for a small limited company would be around £400-500. The self employed NI and income tax on £10,000 would be around £2,600, so significant savings are available. If you are interested looking at this route, I would be pleased to help you further.

Regards

James Smith
Chartered Accountant
www.uktaxshop.co.uk
01284 764436

Nigel Lord
Posts: 518
Joined: Wed Aug 06, 2008 2:18 pm

Postby Nigel Lord » Sun Oct 19, 2003 5:04 am

RJUK

Expanding on James' comments, there are a number of ways that you could become the focus of the authorities' attentions:

1. All Tax Returns are subject to a random Enquiry pre-selected by computer. The per annum percentage is small but over your career the chances of being selected are relatively high. As the Revenue have the power to look back in time, you could find that the financial penalties are punitive. There is also the possibility of prosecution.

2. If your returns show an anomaly, the computer will automaticaaly select your case for enquiry.

3. Many tax avaders are identified by informers or by Revenue officials discovering information by accident.

4. The Inland Revenue have specialist Black Economy Units who tarket small traders, and car boot sales.

5. The Contributions Agency and Customs & Excise (VAT Inspectors) have similar units.

6, There are specialist units who investigate evasion in particular industry groups (e.g. motor related industries).

7, Your employer may be subject to a PAYE of VAT inspection which may throw up anomalies.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk

RJUK
Posts: 10
Joined: Wed Aug 06, 2008 3:06 pm

Postby RJUK » Sun Oct 19, 2003 10:31 am

Food for thought!

I think I will make sure I get everything down then.

From a point of view of expenses records, I use Excel, is there some site that outlines how to keep the records ie. stationary/cash in/cash out/running costs/ and so on?

I want to get this right, but earn so little just feel not worth getting an accountant.

Thanks for all your help!

RJ

Nigel Lord
Posts: 518
Joined: Wed Aug 06, 2008 2:18 pm

Postby Nigel Lord » Sun Oct 19, 2003 11:24 am

RJ

I recommend that you look at the notes that come with the Self-Employed section of the Self-Assessment Return (SE100) see link:

http://www.inlandrevenue.gov.uk/pdfs/20 ... _notes.pdf

Try to place all expenses in the categories that need to be entered on the form and you will save a lot of time and effort. You probably do not need an accountant to prepare accounts, but should consider asking someone to review your workings. I would recommend that you contact James Smith (see above) at:

www.uktaxshop.co.uk

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk


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