Tax situation for a Network Marketer?

[gravesmark]

Hi,
I have a PAYE "day job" but am also building up a commission-only income with a network marketing company. I've registered with the IR as a sole trader although I'm not actually trading as such (I gather customers but they don't pay me - they pay the network marketing company I represent & the company then pay me commission).

I have 2 questions. Firstly was I right to register as a sole trader rather than form a Ltd. company (my income is only around £2000 per year) and when should I consider incorporation (ie. at what level of income).

Secondly I understand that if I register for VAT in order to claim back the VAT on my business expenses, I'd have to raise invoices for my commission coming in. Can I raise these invoices after I get paid? The reason being I have no way of knowing the amount of commission until after it is paid, as it's based on a percentage of customer phone and utility usage. Thanks for any help.

[accountant@uktaxshop]

I think Ian and myself covered the VAT angles on your previous post. As you are effectively receiving "self billing" you would need to sort out the VAT position with your network company. It is not a huge issue.

Re going Ltd - there is some help in the "tax doctor" section on this topic.

No doubt your normal accountant could advise you in more detail, but in general at that level of income I wouldnÂ’t bother incorporating.

Accounting fees are likely to be £300-£500 higher than as a sole trader, wiping out your tax saving. Tax saving as a higher rate payer = £300, lower rate = £600. If however you anticipate higher future sales, it could well be worth looking at, assuming you are not caught by IR35 and actually classed as an employee of the marketing company.

Regards

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