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Contacts:
General
Enquiries
Accounts
Department
Tax Department
Payroll Department
VAT Department
Webmaster
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Frequently
Asked Questions (FAQs)
Please
feel free to submit your FAQs to us - they may help others who are
in the same position.
Q.
What does Self-employment mean?
A.
A simple enough question you would think, but the answer is not
quite as simple.
It may be easiest to start by thinking not about
a self-employed person but an employee. We all know what an employee
is - someone who works for an employer and receives a wage which
has tax and National Insurance (NI) deducted at source under the
Pay As You Earn (PAYE) system. An employee, in return for his/her
wage, is required to work between certain hours each day and will
have a "contract of employment" setting out terms and
conditions of employment. An employee will normally still be paid
when on holiday or off sick. If the employee has no other source
of untaxed income, the Inland Revenue will not usually require that
person to submit a Tax Return each year.
A Self-employed person, on the other hand will:
-
Not
have an employer but will have customers instead,
- Charge
these customers for the work he/she carries out,
- Receive
payment gross i.e. without tax or NI deducted,
- Be
required to submit a Self Assessment Tax Return to the
Inland Revenue each year
- Be
responsible for calculating his/her own tax bill and making
payment to the Inland Revenue by prescribed dates.
A
Self-employed person must:
-
Notify
the Inland Revenue of the self-employment within 3 months from
the
date it starts - there are penalties for missing that deadline.
See Relevant Dates
- Maintain
proper records so that business accounts can be prepared. This involves
keeping copies of all invoices issued to customers, bank statements,
receipts relating to business expenditure etc. See
Online Bookkeeping.
It is recommended that a self-employed person hires
an accountant who will prepare the business accounts and Self Assessment
Tax Return together with dealing with all taxation matters.
Q.
I am not able to pay the VAT immediately because of a temporary
“Cash Flow” problem. I have spoken to the bank but they
are unable to help. What else can I do?
A:
We could write a Time to Pay letter on your behalf, which may be
able to help you obtain a reasonable period in which to pay the
debt. In most cases, the VAT Officer will consider the payment plan
and accept it, especially when you have good historic records. Even
if they refuse to accept your plan, normally it takes quite a few
weeks for this to be processed, resulting in some borrowed time.
Plus, during this period you will probably manage to pay off the
debt. However, if you do fail to pay the weekly installments on
time, as agreed, or The Debt Department do not receive a response
from you, they may ask you to pay off the debt immediately, otherwise,
they will take action to recover the money they are owed.
Q.
I haven't filed my tax return yet and it's 30 December - am I in trouble?
A.
Only if you wanted the Tax Office to calculate your tax for you, or
you had a small (up to £2,000) liability for 2006/7 which you
wanted the Revenue to collect through your 2008/9 PAYE code.
The rule is that you have until 31 January 2008 to file your 2007
Tax Return - reporting income and gains for the year ended 5 April
2007 . But if you leave it until then, you will have to work your
tax liability out for yourself and you lose the chance to have small
amounts of tax due collected through your PAYE code.
If your Tax Return is filed late, you will be liable to a penalty
of £100, or the tax due, if less. There is a second penalty,
again equal to the lesser of the tax due and £100 if your Tax
Return is not filed by 31 July 2008.
There are, though, some circumstances in which a late Tax Return will
not result in a penalty. By law you must ask for a Tax Return by 5
October after the end of the tax year if you know you have tax to
pay. In such cases you have three months from the date the Tax Return
is issued to complete and file it.
There will be changes to the dates for filing the 2008 Tax Return
& these will be available in due course.
Q.
Can I use estimates if I don't have the correct figures?
A.
You need to be very careful about using provisional
figures. First, you will have to notify the Tax Office that your Tax
Return contains provisional figures - then you will have to explain
why the correct figures are not available, and the date by which you
will be able to provide them.
So,
yes, you can use provisional figures, but only temporarily and only
if you have a good reason for using them - having left it too late
to obtain the figures is not an excuse which the Tax Office will accept!
If
the Tax Office rejects your Tax Return because you used provisional
figures and they did not accept your excuse, you may be given more
time to file. But the law says that you must retain the records to
enable you to complete your Tax Return, so the onus really is on you
to make sure you have all the figures to complete your Tax Return
in good time.
We
specialise in ensuring that our clients' Tax Returns are filed on
time. Take the worry out of your Tax Return and trust us with your
next Tax Return. If you know anyone who would like us to complete
his or her Tax Return, do please let us know.
Q.
My
job is about to take me overseas for about two and a half years. I am
very worried because I have read that the 'foreign earnings deduction'
has been abolished. Does this mean I will have to suffer PAYE while
I am abroad?
A.
Because of 'large scale abuses' (in particular by pop
groups doing long overseas tours) the general foreign earnings deduction
was cancelled. However, if both your stay abroad and your employment
are expected to extend over one complete tax year, the Revenue will
be willing to classify you as non resident from the day after you
leave the UK. Your overseas earnings are outside the scope of the
UK tax system if your interim visits to the UK are fewer than 183
days in any tax year, or an average 90 days or less per tax year over
the whole period.
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