So I've hit a bit of an annoying situation. As mentioned in the Photography board, I got a commission to photograph some signage for a project at work.
It was all agreed with the project officer, I took the photos and gave him an invoice.
I suspected there'd be an issue, and I was right. When it landed on the senior admins desk, she took one look at it and sent me an email to come and see her. Apparently as I am already a university staff member being paid by PAYE, the university cannot be invoiced by me, nor pay me, despite it being my own side business that I do in my own time with my own equipment.
I won't go into the conversation too much but there were various "almost" accusations that I should have known better etc, despite honestly thinking it shouldn't be an issue. Ultimately though it was also mentioned about tax and vat. She reckons I need to be VAT registered, but I was under the impression it's only mandatory above £54k a year. As I make maybe £200-300 a year from photography if I am lucky, I didn't/don't think it is required. Reading into things a bit, it looks like whether I register or not is down to who my clients are likely to be and whether they are VAT registered. If I register, it'll mean that for individuals not registered, they'll have to pay the 20% VAT on top of my prices, but if the client is VAT registered, they can reclaim the VAT and are no worse off?
I'm sure some of you here must be self employed and could give some simple advice as to what to do? Register or not?
Sole trader. Do it. Keep track of equipment costs and invoices for tax return at end of year.
Vat registration only applies to size of company and type of company you want to run (limited liability, etc).
There was a good government website that explained all this when I was looking into it a while back I'll see if I can find it.
https://www.gov.uk/business-legal-structures
Sent from my Nexus 4 using Tapatalk 2
As for vat registering...
https://www.gov.uk/vat-registration
Its voluntary unless earning over 77k
Sent from my Nexus 4 using Tapatalk 2
It shouldn't be an issue and she's a bit of a nob, you don't have to be VAT registered, and it's not really worth the hassle of sole trader or anything like that for a few hundred quid.
If you are not VAT registered they can't claim back the VAT, but that's not illegal or anything, tell them to sort it or stuff it :P
QuoteSupplying goods or services within the UK. If your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current registration threshold of £77,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT. However, if your turnover has gone over the registration threshold temporarily then you may be able to apply for exception from registration.
http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm (http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm)
HMRC website everything you need to know about tax :)
Edit: Also just to add, register for VAT when it's in your benefit not in the benefit of others, if you buy a new camera, you could save yourself 20% by being VAT registered, but you need ot take in to account other expenses such as an accountant or time and effort to do it yourself!
The way she explained it though was that if the uni (or another company like it) did get an invoice like I provided, if/when they were audited, if the auditors saw the invoice they might check up "Fresh Air Photography", and then I'd get a letter from the inland revenue or something asking about taxes. Then the onus would be on me to prove I'm not earning mega bucks through the business and dodging tax. I'm guessing she was talking through her arse? Or is this something to do with "2nd income" or something?
It is tempting to register, 20% off a 5D Mk III, but I'm guessing if they somehow checked if you were using it for personal use, you'd get in trouble if it turned out you've not used it for business?
They could well check out who you are and whether or not you're paying tax. You'd probably be unlucky if it happened but it could.
You dont need VAT registration for any of that though so I wouldn't worry about that. If you make any income outside of PAYE work you obviously have to pay tax on the income and thats what she is getting at.
So, how much and how do you declare it? There will be someone else better than me who can answer that as I've only ever been PAYE. It could mean setting up as a sole trader or company or whatever but its gonna involve tax returns.
you dont have to be vat registered but you will have to declare your profits on the job to HMRC.
I'm assuming that the following applies to registering for VAT, as opposed to Sole trader:
QuoteTo be in business, these activities must have a degree of frequency and scale and be continued over a period of time.
As to be honest £200 every 12-18 months is hardly big scale frequently over a long time...
Its still some kind of frequency though.
She is absolutely talking out of her arse thinking you will be ignorant and back down, or she is just stupid and doesn't know any better.
In summary:
- You do not have any requirements whatsoever to be VAT registed. I have an Ltd that is not VAT registered and I invoice, people, sole traders, big VAT registered companies, etc.
- It's down to them whether they can claim back the VAT on an invoice - if you don't charge it because you're not registered, they can't/don't claim it and they can't force you to register for it just so they can.
- Being VAT registered is not the sign of a 'real' business, the HMRC don't go around chasing companies that aren't VAT registered to check that they aren't Del Boy and Rodney :lol:
- HMRC will not come and bum you, just make sure you declare any earnings on a self assessment at the end of the year)
- Registering for VAT is more of a hassle than it is worth unless you make alot of purchases that would be claimable as a business expense to offset the hassle/costs of getting your books done correctly (and potentially having to decrease prices by 20% or hope you won't piss off clients by raising them 20%).
- It only really makes sense if you deal predominantly with other VAT registered businesses.
Oh and to answer M3ta7h3ad's question, anything over the £7k tax threshold must be declared, whatever the source of the income. If you are already earning a wage over that then of course this must be declared
if you've got thousands worth of equipment etc.. and make a couple of hundred here and there the tax man won't care less
(because if you were registered as a business you'd be making a loss all of the time anyway)
and the vat man won't care less unless you're trying to charge vat
there's an element of common sense in it, you don't have to register as a business as long as you're not running it as a business, if it's just something you do in your spare time, with your own equipment then sell the odd bit here and there for not a lot then you're fine... it's only a business if you're going out of your way and trying to make money out of it
Also if they refuse to back down put something in writing and send it recorded delivery. You either want payment or all of the materials/work back. Don't let them think they can fleece you. I'm owed money from two months ago and will be putting it in to Small Claims Court if I don't get it by Friday.
Well reading a few websites I've ended up applying for self assessment. At the end of the day it'll likely just mean each year I send it back saying I've earned nothing!
Main thing is I now have to apply for excemption from paying class 2 national insurance contributions.
At least this way hopefully if they come back and say anything at work RE: the commission I can say I'm registered as a sole trader so suck it and give me my money. Either that or it'll cause them issues with my PAYE and it'll be more paperwork for them because they were being tight fisted.
Well it can't hurt at all, if anything it might spur you on to take on more side work in future. I'm totally freelance now and wouldn't look back.
Quote from: zpyder on March 06, 2013, 23:19:02 PM
Well reading a few websites I've ended up applying for self assessment. At the end of the day it'll likely just mean each year I send it back saying I've earned nothing!
Main thing is I now have to apply for excemption from paying class 2 national insurance contributions.
At least this way hopefully if they come back and say anything at work RE: the commission I can say I'm registered as a sole trader so suck it and give me my money. Either that or it'll cause them issues with my PAYE and it'll be more paperwork for them because they were being tight fisted.
Its got naff all to do with your PAYE she's just being a dumb Bint tbh...
you've invoiced them, they can pay you just like any other person/entity... VAT registered or not is irrelevant, ltd company or not is irrelevant...
just fill out a self assessment form at the end of the year and declare your £200 income from this
also I doubt you're breaking any rules unless your employment contract forbids you from undertaking other work - would be highly unlikely since its a uni and plenty of academics do work on the side
theres a flat rate vat scheme for VAT which is what I am on.
You charge the 20% vat on everything, but you cant reclaim your vat. Instead your rate might be set at 10%.
So of the 20% vat you collect on behalf of HRMC, you pay them the 10%
Photography is set to 11% (but a 1% extra discount in the first year)
http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm
Its great if you have minimum outgoings & only income. Not worth the hassle on a few hundred a year though.
What is good though, if you spent £2000 in a single invoice (can be multiple purchases), you can claim the VAT back.
Just set a sole-trader account up & invoice them in that company name.
I would be tempted to make a complaint about her trying to defraud you & your work.
I would ask for it not to be used pending this dispute.
Well hopefully I'll have the sole trader tax ref set up by the time she gets back to me with what they can do. I'll then give her that and ask for her to provide in writing the reason why they could not pay me the full £200 that was agreed upon in writing, as I'll check out the reasoning with the family accountant.
It won't make me popular but I wasn't planning on sticking around here that much longer anyway!
It sounds like she was confused between being registered with HMRC as a Sole Trader and being VAT registered. I can appreciate why she would have been nervous about paying your invoice if you weren't a registered Sole Trader as the Uni could well have been grilled about it by the auditors.
I know for a fact that a number of schools won't pay the invoices of Sole Traders unless they can prove that they are self employed, and this means a letter from the accountant, and in some cases, a letter from HMRC themselves.
For business purchases (eg. a 5DIII), don't forget that you can still offset it against tax (as a business expense), even if you're not VAT registered and can't claim back that 20% VAT. In fact, all activities related to running your business (eg. paying for the fuel that you use to get to a shoot, or buying Lightroom 4 etc.) can all be offset against tax.
You don't need to be VAT registered until your turnover (not profit) exceeds £77k. A word of warning though, tax inspectors are a pain, VAT inspectors are nasty.