AIBU to have given unwanted advice

[GarageRoofLeak]

My sibling has decided to go self employed in order to get off benefits. The job requires a lot of up front expenditure and many further expenses which they have been told they can claim as business expenses for the purposes of tax. However, they seem to think that claiming expenses means they will be refunded the full amount by HMRC. I have tried several times to explain that this is not what happens. They have budgeted as though they will be getting all this money back and already made some fairly big business purchases.
When I broached the subject they became very hostile, claimed I was trying to sabotage their job (by explaining how tax and expenses work) and has now blocked all contact with me.
Was I unreasonable to give them factual information about tax? They insisted I was “lying”. Funnily enough, after a bit of googling, I can see that many people do seem to believe they get their expenses paid back in full, if self employed. Is anyone actually in self-employment and receiving reimbursement for business expenses rather than a reduction in tax?!
Was I unreasonable to explain tax to them when they didn’t ask for my advice?

The op was absolutely correct in her advice

but she admits she has repeated it multiple times

and now this sibling has blocked her!

Ah so you ARE the sibling 😂

Oh you’re a 🧦

Ok, but why is it making you so cross? You weren’t privy to it, and only know vague details because I am being deliberately vague, as I have already said.

We gave advice to one of our sisters. She didn't listen.....

Had a hefty tax bill..... She learnt the hard way. You weren't in the wrong to give advice but not worth loosing a sister over. Let her get on with it

When I went self-employed, I set up a limited company rather than working as a sole trader. I’m VAT registered, which means I can reclaim VAT on legitimate business expenses, this helps reduce the amount of VAT I owe to HMRC at the end of the quarter. However, that doesn’t mean the government pays for my expenses, it just means I can offset certain costs, which slightly lowers my tax bill.

Some people misunderstand how this works. You can claim allowable business expenses to reduce your taxable profit, but the government never reimburses those costs in full. You’re still paying for the items yourself, you just get tax relief on them, which typically means saving 19% (for corporation tax) or a portion of the VAT if you’re VAT registered.

I also came across claims online that if you buy something like a phone in the company’s name, you can “get the full cost back from the government.” In reality, you can usually claim 100% of the cost as a business expense if it’s used wholly for business purposes, but that doesn’t mean HMRC gives you the money back.
You just don’t pay tax on that amount of profit. If there’s personal use involved, it gets more complicated, and it might count as a benefit in kind. But when I first read this claim I wondered if I’d been doing it wrong all this time, and if I could actually claim back more than I have. It’s easy to get blinded when it works in your favour.

It might be worth pulling together a few reliable sources (like GOV.UK or the HMRC manuals) to explain this simply, lots of people mix up reimbursements, tax relief, and VAT reclaims, so it’s an easy mistake to make. You can gently clarify that they’re not wrong to be curious, but it’s best to double-check these claims before relying on them.

Instead of being worried about that?!
Why would I have even bothered to post on here if I didn’t care that they blocked me?
I didn’t do anything untrustworthy or have nefarious motives. I just sent them facts. They are adamant I am lying for the simple reason they have a firm belief they are being paid back expenses (like if they bought golf buggy- they would get all the money back) and they cannot understand why I would lie about it, other than think I have ulterior motives. Why would anyone lie about it? I mean, they have repeated that they will be paid the money back MULTIPLE times. I did not call them a liar. It’s a misunderstanding on their part. I was just trying to make them aware that they had misunderstood, each time they repeated that they were getting it paid back. They could have suggested I had misunderstood but didn’t. Straight to calling me a liar. I don’t lie. They know I don’t lie. I have never lied to them in my life. I back everything I say with evidence (e.g. links to HMRC website and video explaining tax/expenses. I wasn’t just saying the same thing multiple times. I was sending evidence and suggesting they clarify with an accountant (seeing as they keep saying they have one- which they don’t).
Why does it bother you so much?!

Yes, this is what I did. Links to HMrC website, videos explaining tax and expenses, and suggestion to speak to an accountant to clarify. They siad “You are a liar” and posted a similar link back to me which said they could “claim business expenses” 🙄

The OP has clearly come to Mumsnet to reinforce her position. And has asked in the OP for real world experience, if anyone can share and advise based on what they know. You’re sat spending time on Mumsnet blasting people for asking for advice. You can’t share your experience as you don’t have any… so why are you here?

You pick issue at others issues.

But you know what will happen when they eventually realise? They will blame me for not having made them aware “enough”… 👀

Ah, ok. And what was in the link they sent back? Can you comb through it and highlight /translate what it really means? And counter it with links that back up what you’re saying for each point?

Or Maybe you could share someone else’s experience, in a way that is more like “I’m sharing because I love you and I just want to help, but you’re not foolish for thinking this way at all, as it’s a common misunderstanding”

Or maybe just accept that they will never listen and might have nefarious reasons they’re not sharing for doing what they’re doing, and trying to justify it /or kid themselves. 😁

😂 have you heard of projection and 'the lady doth protest too much methinks'?!!!

Yes would be interesting to know sibling’s point of reference re this link they sent back

but they’ve blocked you.

is this something they do often? Block and unblock block and unblock?

I did try. What they sent me was Google response “yes, you can claim business expenses” in their situation. I had told them also that they can claim business expenses but that this did not mean that HMRC pays them back money. They more or less said it amounted to the same thing. It clearly (to most people, and to HMRC) doesn’t. I tried to explain that it is all money out, that you pay expenses and then you pay tax as well. You pay less tax after expenses are taken out of taxable income. I gave them a clear numeric example. Earnings 30000, expenses 10000, taxable income 30000-10000=20000. Then I said, you pay the 10000, and you pay an amount of tax based on the 20000 rather than the 30000. So expenses go out, and tax goes out. Nothing comes back in unless you have overpaid tax or can claim UC as a top up. You certainly don’t get your £10,000 back.

Their insistence that I was “lying” made me doubt myself, but so far nobody has come her to say they have receieved expenses back in any situation.

If she has a business that is up and running, she can claim legitimate expenses from the company (NOT from HMRC). This means the money for those business expenses does not get taxed as income and reduces the profit (if any) held in the company. What that means is the company pays for it not the owner. Buying stuff before the company exists doesn’t sound like it would work but there may be a mechanism for doing that.

All that said it’s extraordinary the number of people who will be extremely resistant to the idea of working for yourself in your own company and also the number who think they understand the ins and outs of the finances. It’s a huge hurdle to get over in the beginning. Your sibling can learn all this and will have to.

Then make a note of the time and dates you sent them the info. Screen shot what links you sent them telling them they did have to pay. Then they will have zero comeback when they inevitably find out they are wrong because you have proof you warned them.

If this were me, I would do this and then completely drop it. I get you dont want them to get into shit but you cannot rob people of their right to make mistakes, this is how most of us learn. You are ultimately infantilising this sibling by not allowing them to fuck up. If they are grown up to start a business then they are grown up enough to learn about tax laws.

Its natural to love your sibling but I am wondering why you feel such a burden of responsibility for their life choices here- might be worth reflecting on for your own sake.

I assume it’s not a lifetime ban. I haven’t committed a crime.

They haven’t worked for many years for health reasons. They have been in a good place more recently, really wanting to get off benefits and make this work. I want this for them also. I have been supportive of them in this endeavour from the start.
Last week they said that they will have £3000 per month to live on once they start working. That would mean £36,000 after tax and expenses. The average income in their planned job in their region is around £25,000 gross.
I could sit back and say nothing, but I want them to be successful, so I mentioned needing to budget in the first year. Then they mentioned buying x, y and z expensive luxuries. They already have bought something at multiple thousands, because they think they are going to have a large income very soon. They said it is all fine because they get their expenses paid back.
Unless they have secretly won the lottery none of the financial side makes any sense. To run a successful business you kind of need to understand profit , loss, expenses, tax and how to budget. They don’t seem to understand any of it. I suggested they read a book on the subject. And had the conversation about expenses that clearly pissed them off.

Ach well they’ll work it out eventually, let’s hope they don’t bankrupt themselves first.

Hope so. 🤞

I mean, hope they work it out, not hoping they bankrupt themselves!

I think you did the right thing but now you'll have to let them find out the hard way and do not bail them out.

I wonder if their misunderstanding comes from a long period on benefits. After all, you 'claim' these and the government gives you money. You 'claim' expenses for your business too with the government (HMRC) - they haven't grasped that the meaning is different. To them 'claim' means you are paid something. So yes, a business advisor probably has said they can claim their expenses - both talking at crossed purposes.

You did your best. They weren't willing to admit they'd got it wrong so got angry. Let the dust settle and see if you can pick up contact (if you want) and avoid the topic completely.

That's what I was thinking too.

You would think, but no, not their style of writing.

and instead of being worried about that. You just want mumsnet to tell you that you’re RIGHT.
well yes, your are RIGHT in your understanding. Happy?

Very odd thing to say. Yes, I was doubting myself and turned to mumsnet to see if I was right. I literally said it in my original post! What’s wrong with that?