Curious about risks when not registering as self-employed

[MatthewLM]

I have registered but I know others don't. Even when they can earn quite a bit.

What are the chances that they run into problems and how severe is it? Also what level of profits do people have to make before it becomes risky evading tax?

People said I shouldn't bother registering with my iPhone app business. I'm making enough for about £6000 a year at the moment and it's increasing. Not sure how much a risk it would have been if I didn't register?

As well as being curious I want to know if that was a sensible decision or not to register.

 

[DeanCo]

You cannot be completely sure how the HMRC work but as far as I am aware there is no level of profit to make it risky evading tax. HMRC do not have a trigger point and everybody who evades tax is committing a criminal offence no matter how small or how large the amount everybody has to comply with the law.

Anybody who does not register a business is risking anything from fines plus interest to jail. You might get away with it for 5 years or if you are lucky 10 years but they will eventually catch up with you. Do not do it. It is not worth it.

Your personal allowance is £6475 so if your making £6000 and if that is your only income you will pay zero tax. Even though you have no tax to pay if you did not register you are still risking heavy fines and the longer you do it the more the fines will be. Registering your business is a good move.

 

[Scalloway]

I remember being told years ago that the Inland Revenue used to scan local newspapers for ads for people offering business services and check to see if they were legitmately self employed.

 

[DeanCo]

The HMRC investigators are into everything these days. I have seen people being caught after their website was discovered or after checking Trading Standards complaints records or after a routine scan of their bank account. There really is almost no limit what they can check.

 

[elaine@cheapaccounting]

What are the chances that they run into problems and how severe is it? Also what level of profits do people have to make before it becomes risky evading tax?

Tax evasion is a criminal offence - no matter how small the amount of underpaid tax

 

[MatthewLM]

Okay thank you everyone. I feel better that I did the sensible thing.

I do have to pay class 2 NI as the exception limit is about £5000 is that right? My income will soon rise above the £6475 threshold as well.

 

[elaine@cheapaccounting]

From April the NI exemption is £5315 and the personal allowance if £7475


Class 2 NI is £2.50 / week and Class 4 National Insurance on profits over £7,225 is at a rate of 9% up to £42,475 and 2% thereafter

 

[MatthewLM]

Thank you.

2% on top of the 9% I assume?

 

[LicensedToTrade]

There are a growing number of 'Hidden Economy' teams being set up across the country on a trial basis. Their main purpose is to identify those who are operating very small unregistered businesses.

 

[MatthewLM]

If businesses and perhaps consumers decided to make transactions in a new currency and not pounds, would we not have to pay tax on it since it's a new made up currency?

Just one of my wacky ideas.

 

[LicensedToTrade]

If businesses and perhaps consumers decided to make transactions in a new currency and not pounds, would we not have to pay tax on it since it's a new made up currency?

Just one of my wacky ideas.

Benefits in kind, still very much taxable i'm afraid.

 

[elaine@cheapaccounting]

If businesses and perhaps consumers decided to make transactions in a new currency and not pounds, would we not have to pay tax on it since it's a new made up currency?

Just one of my wacky ideas.

yes truly wacky

I would like to see you try to spend the profits in your wacky made up currency

 

[Rolo Tomasi]

yes truly wacky

Actually not that wacky. I believe that players of online games such as world of warcraft and second life 'earn' the games currency which in turn can be spent either enhancing the game or can even be withdrawn into 'real' bank accounts. Is this income taxable? Are players trading?

I've had a quick look at the Revenues website and cannot find any mention of this so perhaps the income is not taxable.

 

[MatthewLM]

"I would like to see you try to spend the profits in your wacky made up currency"

Just convert it back to pounds when there are places which only deal with pounds.

I found this - http://news.bbc.co.uk/1/hi/8245276.stm

Look at the bottom. It basically says any transaction must be taxed in the equivalent amount in pounds.

 

[LicensedToTrade]

"I would like to see you try to spend the profits in your wacky made up currency"

Just convert it back to pounds when there are places which only deal with pounds.

I found this - http://news.bbc.co.uk/1/hi/8245276.stm

Look at the bottom. It basically says any transaction must be taxed in the equivalent amount in pounds.

So it would be taxed, doesn't that sort of defeat the entire purpose of what you were trying to achieve?

The Brixton pound campaign was a very localised idea that never really took off, for a start when you create a new currency with an exchange parity (in other words 1 unit = 1 unit) you can only ever make a loss because it costs money to actually design and print the notes and nobody wants to be left with the funny money when the whole thing collapses.

The other problem is that you need to convert that money back into pounds eventually, you can't pay your mortgage with funny money and as soon as a benefit in kind can be converted into cash it falls foul of the same taxation requirements.

 

[elaine@cheapaccounting]

Actually not that wacky. I believe that players of online games such as world of warcraft and second life 'earn' the games currency which in turn can be spent either enhancing the game or can even be withdrawn into 'real' bank accounts. Is this income taxable? Are players trading?

I've had a quick look at the Revenues website and cannot find any mention of this so perhaps the income is not taxable.

If it's income then it has to be declared

Are we saying that anyone who lives in cyper space and not the real world doesn't pay tax now :|:|


I am moving there

This place gets more beyond real every day

 

[MatthewLM]

They have to pay tax on computer upgrades worth £1000 a month.

 

[LicensedToTrade]

If it's income then it has to be declared

Are we saying that anyone who lives in cyper space and not the real world doesn’t pay tax now :|:|


I am moving there

This place gets more beyond real every day

I'm always a little suspicious about someone for whom their initials are MLM.

 

[elaine@cheapaccounting]

I’m just a boring accountant – I can only deal with reality.


The men in white coats tell me that is the best way

 

[LicensedToTrade]

I live in a world much like the blue man group, full of elaborate drum routines and face paint.

 

[elaine@cheapaccounting]

I live in a world much like the blue man group, full of elaborate drum routines and face paint.

I used to live in Suffolk - I remember it used to be like that

 

[LicensedToTrade]

I used to live in Suffolk - I remember it used to be like that

Where abouts in Suffolk? I'm not from suffolk originally. I have no routes, my finger prints have been sanded off

 

[MatthewLM]

What's wrong with MLM?

 

[LicensedToTrade]

What's wrong with MLM?

Google it

 

[elaine@cheapaccounting]

Where abouts in Suffolk? I'm not from suffolk originally. I have no routes, my finger prints have been sanded off

Ipswich

I'm originally from the county next to Suffolk (going towards London )

 

[MatthewLM]

http://www.google.co.uk/finance?client=ob&q=NYSE:MLM

??????

That's the first thing that came up.

"Marxism-Leninism-Maoism"



http://en.wikipedia.org/wiki/MLM

I clearly must change my name.

 

[Rolo Tomasi]

If it's income then it has to be declared

Are we saying that anyone who lives in cyper space and not the real world doesn’t pay tax now :|:|


I am moving there

This place gets more beyond real every day

I knew I had read something somewhere. Have a look at this article from the ACCA magazine. Its from 2007 so may have now been superceeded but it states

"HM Revenue & Customs (HMRC) has said taxpayers are free to make profits in worlds such as SL providing their activities do not yield sums higher than their annual capital gains allowance of £9,200"

 

[An Oasis]

There are a growing number of 'Hidden Economy' teams being set up across the country on a trial basis. Their main purpose is to identify those who are operating very small unregistered businesses.

That can't be a cost effective way of operating. Surely they would be better off concentrating on the upper end of the market? There must be the equivalent of the 80:20 rule for tax evasion?

 

[MatthewLM]

"That can't be a cost effective way of operating"

It's the government. What would you expect?

 

[LicensedToTrade]

That can't be a cost effective way of operating. Surely they would be better off concentrating on the upper end of the market? There must be the equivalent of the 80:20 rule for tax evasion?

Presumably this is why they are being conducted on a trial basis. I wouldn't have thought it was that cost effective either, at the same time you can say that about multiple HMRC departments!

It can't even be heralded as an effective scare tactic as most of the people that is is tasked with finding won't have heard of it before.

 

[elaine@cheapaccounting]

Surely if income is translated into reality then it becomes real income and subject to tax if appropriate.

What happens in these virtual worlds is of no interest to HMRC – or me for that matter.


Let’s face it you are just referring to a giant game of monopoly but if someone gives me a grand for playing monopoly them it is income

 

[LicensedToTrade]

http://www.google.co.uk/finance?client=ob&q=NYSE:MLM

??????

That's the first thing that came up.

"Marxism-Leninism-Maoism"



http://en.wikipedia.org/wiki/MLM

I clearly must change my name.

Try Multilevel Marketing or Pyramid Selling

 

[MatthewLM]

Ah, I can't be bothered to get my head around it but I'm guessing it's a type of get rich quick fraud which I warned someone about once. This referral thing which never works and is stupid.

 

[elaine@cheapaccounting]

Ah, I can't be bothered to get my head around it but I'm guessing it's a type of get rich quick fraud which I warned someone about once. This referral thing which never works and is stupid.

that's how I felt about ...

If businesses and perhaps consumers decided to make transactions in a new currency and not pounds, would we not have to pay tax on it since it's a new made up currency?

Just one of my wacky ideas.

 

[MatthewLM]

That's not a con, it's a tax avoidance idea... made in vain it seems.

 

[LicensedToTrade]

That's not a con, it's a tax avoidance idea... made in vain it seems.

That's what Al Capone said.

 

[elaine@cheapaccounting]

That's not a con, it's a tax avoidance idea... made in vain it seems.

I think you mean tax evasion



Tax avoidance schemes would work and be clever

 

[MatthewLM]

So making alternative money is illegal. I thought the (stupid) BBC website said it wasn't?

 

[An Oasis]

So making alternative money is illegal. I thought the (stupid) BBC website said it wasn't?

You've made me laugh twice in one day, well done and thanks.

 

[MatthewLM]

What was the other post?