Question regarding taxes etc

[MrsPWN]

My neighbour has been running a small website for a few months now selling knitting that she and some friends do for fun, she takes no wages from it at all, and any money she makes goes into buying more wool.Their theory is they would knit anyway so this just pays for the materials.

She has kept no books or informed anyone, her theory being she is making no money so it doesn't really count. I think she is on tax credit and child tax credit as she has a child and works 40hpw.

Is she right?

[E Storey]

there is some guidance on this here:

http://www.theregister.co.uk/2007/02/09/ebay_uk_traders_tax_guidance/

http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm

Seems to say if she is buying/making with the intention of making profit then she should be registered.

You appear to be saying she does not make a profit.

[MrsPWN]

Thanks for the info, will have a look. I expect she does makea profit, but doesn't withdraw it fromthe business but leaves it in the bank to buy more materials.

[robindunne]

Penalties are limited to the amount of tax owed, so as she isn't making anything there shouldn't be a problem. Incidentally, my wife and mother do pretty much the same thing and they aren't registered as there's no money in it.

[MrsPWN]

Thanks Robin, no money at all but keeps them out of trouble lol, I keep telling them to go abit trendy but it is all matinee jackets and booties :)