to wonder how many Facebook 'businesses' aren't registered with HMRC?

[Mimstar]

Two that I know of, one who boasts about being a business woman - are completely open about the fact that they aren't registered as they 'wouldn't earn enough to pay tax anyway'. That's how it works - is it? National Insurance, for a start.

I am a self employed marketing consultant and copywriter - and it really riles me to see these people setting up a Facebook page (selling dummy clips or 'candy'), painting themselves as the new Alan Sugar and then not declaring it!

I am not sure why it riles me so much to be honest, maybe I feel as though it makes a mockery of genuinely self employed people? Maybe it feels like they are taking the piss! During my first year of being self employed, I didn't earn enough to pay tax but I still declared it and paid my NI!

It is annoying OP. I Tried to go self employed, well free lance really. It didn't go well at all and I only earned a couple of hundred. I declared it all though even though I knew I would end up not owing anything.

I went SE for only a few months to gain experience in different fields that I was being offered work in.

I earnt so little that I thought the tax office would laugh but you know what declaring it meant I got £700 rebate I didn't know I was owed

Plus as it was a 'proper' business I have been able to put it on my CV with no fear if its checked and it was commented favourably upon when I went for current job.

I don't understand why people don't do it... Literally the smaller you the simpler it is and as you get bigger the tax office will give advice. Lets have it though you have to sell a lot of cupcakes / crafts / clean a lot of windows before you make a profit after costs that is greater than your tax code!!!!

I used to have sympathy for cash in hand but not these days...

Yanbu, my landlady doesn't declare and explains that her accountant said it was okay as the income is sporadic. Madness! I'm opening up a business soon and she keeps telling me that I would be mad to declar, I'd rather declare than not!

Eheic where do you draw the line though?

I'm running a startup business - there is no way I'll make enough profit to pay tax for at least 2-3 years, so probably not worth registering with HMRC do you think?

But my turnover is substantial - and it's likely that the cake decorators, dummy clip makers, hair braided etc all have similar % net profit margins.
At what point does a 'hobby' become a business?

China I was wondering that.

I am employed PAYE in one capacity but also do a bit of the same job on the side.

TBH I don't really make any money from the 'bit on the side' once I factor in the business costs. I do it more as a labour of love and because it is good experience. But in a lot of ways I am actually working in a voluntary capacity because I don't really draw a salary from it iyswim.

Therefore I have not registered myself with HMRC.

Should I do so? I thought it would be a hassle for nowt really.

I think as well as wanting to avoid paying tax, people are quite scared of talking to HMRC - what was a nice hobby all suddenly becomes much more serious when you officially say that it's a business.

A Mumsnetter who's a tax specialist said on here once that small firms failing to pay taxes are a massive problem in the UK, although we tend not to realise it or see it as a benign fraud.

I found that when I did a bit of consultancy work on the side, I phoned HMRC up and they were actually incredibly helpful and cheery about what I needed to do. (Yes, I had to pay tax, but I factored that in when I worked out my charges.)

ChinaCups - why not post a thread re your business situation? I think that if you register when you're making losses in your early years, you may be able to bring a loss forward into future profit making years.

If you are charging at all you declare IMO. Remember you also declare all legitimate costs and expenses which are taken into account when calculating if you owe anything.

If you're not taking in much then the tax return is actually really simple. I thought it looked scary the first time but it's not actually that bad

Just to clarify - I am registered as SE with HMRC - and like others, have received a tax refund because I made a loss.

I was using my situation as an example because I think there is a misapprehension that 'registered' businesses are raking it in compared to kitchen table hobbiests who don't bother.

I wonder whether one of the reasons for the cake decorators/dummy clip makers not 'doing the books' is a fear that if they do, they'll realise that they are not making any money, after all? Factor in all the overheads, travel costs, materials etc etc and the profit may actually be very small or non-existant. I know how demoralising it can be to realise that despite the envelope of cash at the end if the week - I've not actually made any profit whatsoever!
It's much safer and kinder to yourself to believe that money is something you have made - and conveniently 'forget' about the extra tank of fuel, or higher electricity bill that it has cost you to 'make' that money.

I am self employed as a lecturer/trainer in one of the main professions, and am registered as such. I also have a hobby as a portrait painter (shamelessly points you in the direction of my portrait of Peter Dinklage as Tyrion Lannister on my profile page) and I sell a painting every now and then. Because of the nature of my main job and not being able to risk any accusations of wrongdoing, I thought I'd better tell HMRC, even though I make a loss with the art, and probably always will. They insisted I register as a business for that too. At the moment, my losses in my art business are being set against the income in my main business, which is fine by me!

My understanding is that you have to register within a short time of starting your business - I think 3 months - and it doesn't matter whether you are making enough profit to have to pay income tax or not)

They may register in future if the businesses start making enough money to be worthwhile. There is a difference between earning pin money and earning a decent amount. If they are earning, say, an extra £30 a month they would owe £72 tax for the year, and that is before anything is charged against tax, so a cake maker might only owe £20 - £30 in tax a year. The person may not think it worth the effort and HMRC may also not consider it worth the effort. Or maybe the people are waiting to see if the business is actually worth pursuing before setting up properly? Still illegal, but more understandable.

But if they are making enough to live on, then yes, they should definitely be registered with HMRC.

£20-30 is still £20-30. Even if you've taken in £1 you declare it. I've even declared losses so in those circumstances owed nothing.

Sometimes doing the right thing can be a hassel or maybe even depressing. No excuse for doing the wrong thing though.

It is their lookout. YABU.

I doubt they are earning enough but would advise they registered as the tax man knows everything. I'm a soul trader and love doing my online tax return as because I also work I usually end up getting tax back. You have to keep careful truthful records and everyone in the tax office is very helpful if you get stuck. I know the tax man knows everything as one of my parents friends who is a pensioner gave a bag of stuff to the charity shop and let them do gift aid. She got a bill for 24 pounds a year later as she didn't pay tax. Was surprised but there you are.

If you make or buy things to sell and have no profit at all, you still have to register as self employed and do a tax return. Profit or loss is irrelevant and HMRC will fine you for it.

There is no such thing as pin money if you run a business, however small.

But if they are making enough to live on, then yes, they should definitely be registered with HMRC.

Which just goes to prove my point - thank you!

There are literally thousands of us who are registered with HMRC who aren't making anywhere near enough to live on!

Hobbiests who have that kind of attitude will never register as a business, because as their income goes up and they think about making it a business, they'll look into insurance and safety regulations etc and realise that they will be worse off, so won't bother.

It's simply about honesty and integrity - some people are prepared to break the rules and others aren't!

You can actually declare casual earnings on your main self assessment form, without having registered as a business (something I found when I had to fill out SA for something else), e.g. taking money to "lead" a one-off tour/expedition of/to a place you know well and where you have contacts. However, the emphasis is on the "casual", and if you are spending anything to earn something, it makes sense to have that recognised as an "expense", particularly if you are making a loss which you can set against your other income, as PPs have commented.

Yes, I agree China. I wonder whether there's quite a lot of people who don't want to do a proper set of accounts and realise that in fact, their hobby makes a loss.

Of course, the other reason for declaring self-employment is that you may be eligible for additional tax credits - isn't there some additional credit if both adults in the household are working? By declaring the hours put into the 'business', the household may be better off

This is an interesting debate. I set up a small business 4 years ago, dutifully registered with HMRC ( I was a professional accountant, so felt duty bound to do the right thing). I have regretted it ever since!! It is a very small business (party plan) so I buy PLI cover but need nothing else. It certainly doesnt pay bills and I work on an irregular basis, so no govt benefits involved. The paper work involved is not worth the effort. HMRC have really improved the de-minimus limits for income (eg I complete a foreign income declaration and now if that is less than £300 pa it just goes on the main form, rather than the separate sheet) so I wish they would do this for small businesses. I get hassled for NI contributions - if I paid these they would push me into a loss situation, so yet more paper work (ie cost to tax payer) for them and I to declare tiny income. So what is business and active trading vs. hobby/casual?

Some could actually be losing out by not registering. I am registered self employed but do not earn enough to pay taxx and ni. However, because I had a small earnings exemtion certificate I qualified for maternity allowance. Only at the lowe rate but still worth it.

Incidently how do h know they aren't registered. Do they tell you?

Get Stuffzed - I know someone who ended up having to pay the taxman a five figure sum for not declaring money earned for doing extra tuition.

Fair enough, imo. If I increased my hours, I'd pay tax on what I earned.

One of our very close friends has recently started a new job in the construction industry - he is self employed but hasn't yet registered with HMRC (although does intend to within the 3 month period) and is already telling us that he won't be paying any tax. His only visible earnings will be below the personal allowance threshold - anything else he earns is paid to him cash in hand. He was saying the other day that only 6 weeks in, he already has cash stashed in various locations around the house. I know, because he has told us, what he is earning, and it is a reasonable income. There is no excuse for not declaring his earnings - you are right OP, it does make a complete mockery of the genuinely self employed who declare all their income and expenditure and pay the right amount of tax.

I am biting my tongue at the moment where this friend is concerned as I don't want to fall out with him and his wife - but his wife has a tendency to be rather judgemental of other people on occasion so I think there will come a stage when I can bite my tongue no longer!

He's shooting himself in the foot when it comes to proving his income for reasons of mortgage lending or any other credit.

Also, if his business accounts are not looking healthy he will sometimes struggle to get bigger contracts/tenders - many clients will want to do a financial healthcheck... might not be an issue now but he'll need three years of accounts further down the line.

I'm s-e and entirely above board. In my first year I made a loss (started in january and hadn't had any invoices paid yet by end of March) and was able to get a rebate from hmrc of about £200 against my personal allowance.

Since then i've needed to submit accounts a couple of times for jobs before appointment and I am glad I'll have my accounts available when DH and I look for a new house/mortgage in a year or two.