When does a business officially start for HMRC purposes

[MrsPWN]

A friend asked my advice and I don't know the answer :|

She needs to inform HMRC and doesn't know what date to use, she sells quilting supplies online. Is it when her website went live or when she had her 1st sale? She has been buying stock slowly over 18m when she had the money even though it was just going into her back room and she is worried if she uses a recent date HMRC may search her name and see she was using wholesalers and decide that was the start and fine her.

TIA

 

[internetspaceships]

Well it depends if she wants tax relief on the stock she bought.

She can take it from the day she sold her first item but then she's not going to get relief on what she bought before she was a business.

 

[MrsPWN]

So even though she would be fined the chances are that would be less that the tax relief?

I think she spent about £750 in total

 

[internetspaceships]

Well honestly she can't have it both ways can she?

She needs to bite bullet and either lose the relief from what she bought, or go for the relief and risk the fine.

 

[MrsPWN]

That was just a question, in general would the tax relief on £750 be more/less than the fine?

 

[internetspaceships]

Sorry I have no idea- it's not the kind of fine I've ever had to bear.

 

[Arch Stanton]

She should register from the date her business started trading. The £750 of stock acquired over the previous 18 months can be introduced into the business. Everytime there is a sale your friend will get relief by claiming the cost of the item sold.

 

[TotallySport]

if she is a sole trader she has to let the HMRC know within 3 months of taking her first bit of cash (unless the rules have changed), she would be silly to register for VAT untill she is above the threshold so don't worry about TAX relief on stock.

 

[Merchant UK]

if she is a sole trader she has to let the HMRC know within 3 months of taking her first bit of cash (unless the rules have changed), she would be silly to register for VAT untill she is above the threshold so don't worry about TAX relief on stock.

Thats all changed now, you neen to let HMRC know that your self employed the day you start, its don't matter if your selling or not. They need to know the day you became self employed.

I agree about the VAT its far too early and she'd end up paying more in the long run as well as increasing her prices by 20%

 

[David Griffiths]

You have to decide when you stop preparing for trade, and actually start trading. For any kind of business, I always draw a parallel with opening a physical shop.

There will be a period where you are preparing to trade - you sort out the premises, fixtures, stock and 101 other matters. That work is linked to the proposed trade, and you are spending money, but you aren't trading.

Then comes the day when you open the doors and wait for customers - that's the date of commencement of trade. It doesn't matter if you don't actually get a customer for a day or more - you are still trading. (When I say it doesn't matter, that's for the purpose of the example, it obviously matters from a business point of view!)

So for any businesses, the question is when did you "open the doors for business?" In this case, I'd suggest it's when the website went live.

There's a comment above that you can't claim expenses before commencement. That's plain wrong, and you can claim costs incurred in the six years before you start - provided that they do relate to this trade of course.

You are required to notify HMRC as soon as you start - there is no longer any reference to a three month period, but in practice they don't usually bother at all if you take a bit of time.