Hi, this will be the first time I am submitting a tax return for my friend and she changed from full time employed to self employed in Aug 13 (and has a P45). Will I need to declare this on the tax return we will submit on 31st Jan?
August 13 was within the tax year 13/14 which you are now filing the self assessment for in Jan 15.
Did she become self employed in August when she finished employment ordid she become self employed the preceding April? If the August then you need to also consider basis periods when preparing the self employed accounts.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Oh, I have never heard of that. Is it something I can find info on, online?
Can I please ask another question: Do we submit her personal tax return with the sole trader one? e.g interest earned on personal bank account?
Thank you so much for replying
Everything is contained in a single self assessment where you will fill in sections related to Employment, interest, self employment, etc.
You only have five days left to file and pay any money outstanding.
You do have everything that you need don't you including your UTR number? HMRC logon, etc. as if not your already out of time (UTR numbers are currently up to 21 working day turnaround and account authorisations 7 working day turnaround).
for basis periods try starting with helpsheet 222 and then move onto simpler explanations (just do a Google search "basis periods").
For future reference with the self employed generally you will find it simpler to start a business on the 6th of April rather than risk double taxation of overlap profits.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
We have all those details sorted, thank God. She started Aug 13 unfortunately. Is it possible to do the first year accounts from Aug 13 to April 14 and then carry on April to April then onwards? (First year of trading she is making a loss of £6.00) It was not a heavy trading year and its a simple catering business where she cooked for a number of people and also done couple of cookery courses so only little income and expenditure going through and no complicated transactions or assets to deal with.
the first year is August to April but the second year is more complex in your scenario. Here are your current basis periods which will hopefully make sense when you see them.
From an August 2013 start date her first three sets of accounts would need to be :
2013/14 - 8 months from August 13 to April 14 self assessement for 31/01/15 (this is the one that you are doing now)
2014/15 - 12 months from August 13 to July 14 self assessement for 31/01/16
2015/16 - 12 months from August 14 to July 15 self assessement for 31/01/17
There is just one overlap period (taxed twice in both 13/14 & 14/15) from August 13 to April 14 but as there was just a small loss there is no issue.
You can change your accounting date but if you do you are not able to use the short self employment form which is the one that you normally complete with the self assessment for micro businesses and instead need to complete an SA103F.
Of course, that would be with the 14/15 return, not the 13/14 one that you are doing at the moment.
HTH,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Just declare self employment income from Aug 13 to Mar 14 on the 2013/14 tax return then on the 2014/15 tax return declare income from Apr 14 to Mar 15. Avoids all the issues with overlap relief.
Just declare self employment income from Aug 13 to Mar 14 on the 2013/14 tax return then on the 2014/15 tax return declare income from Apr 14 to Mar 15. Avoids all the issues with overlap relief.
Are you sure that you can choose to simply ignore basis periods Mark?
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Agreed with Mark. Beste doesn't have to prepare a full years accounts. If she chose to prepare to 31.8.14 then the c/f overlap period would be 1.9.13 to 5.4.14.
Doesn't your post say the same as mine did (see above Mon Jan 26 14:18 2015)
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
We have all those details sorted, thank God. She started Aug 13 unfortunately. Is it possible to do the first year accounts from Aug 13 to April 14 and then carry on April to April then onwards? (First year of trading she is making a loss of £6.00) It was not a heavy trading year and its a simple catering business where she cooked for a number of people and also done couple of cookery courses so only little income and expenditure going through and no complicated transactions or assets to deal with.
Mornin' Shaun, Jo, Beste e1.
I don't think it does say the say same Shaun. There is no Overlap period at all in this scenario because the profits arising in Year 1 are taxed in Year 1.
As we havent been doing annual accounts to any date, I would just prefer the tax year dates for obvious reasons and my friend is totally not bothered. The help sheet 222 says, pick any date you prefer but this seemed too vague to me, then stick to it. From the discussion you are having, it seems as though it can be taken either way, as long as you stick to it going forwards. Am I right?
Yep Beste. You're not forced to 'stick to it' but if you changed accounting period you would conjure up Overlap and Basis period issues. The way you are intending to go is simplest in nearly all scenarios including cessation.
I agree thats possible but would you not need to file an SA103F in order to change the date to run from April to March?
I did say that at the bottom of my reply but it's easy to miss as the bulk of my reply is stating the basis periods if the date is not changed (next year).
Think that this is one of those where we're actually agreeing with each other but I think that I need to labour my point as not everyone reading this site appreciates the significance of basis periods and I don't want people thinking that it's possible to simply ignore them rather than override them.
I know thats not what your saying but I hope that you see my point about me labouring the point in order to consider the wider audience for our posts.
kindest regards,
Shaun.
p.s. I was replying to the message two up rather than the last one.
-- Edited by Shamus on Thursday 29th of January 2015 11:27:56 AM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
the first year is August to April but the second year is more complex in your scenario. Here are your current basis periods which will hopefully make sense when you see them.
From an August 2013 start date her first three sets of accounts would need to be :
2013/14 - 8 months from August 13 to April 14 self assessement for 31/01/15 (this is the one that you are doing now)
2014/15 - 12 months from August 13 to July 14 self assessement for 31/01/16
2015/16 - 12 months from August 14 to July 15 self assessement for 31/01/17
There is just one overlap period (taxed twice in both 13/14 & 14/15) from August 13 to April 14 but as there was just a small loss there is no issue.
You can change your accounting date but if you do you are not able to use the short self employment form which is the one that you normally complete with the self assessment for micro businesses and instead need to complete an SA103F.
Of course, that would be with the 14/15 return, not the 13/14 one that you are doing at the moment.
HTH,
Shaun.
Hi Shaun,
I think that's the statement we've picked up on in isolation. Agreed, you're right to ring alarm bells over basis periods but if I'm reading it correctly there is no period that is taxed twice. The basis is the tax year itself including the year of commencement.
Year 2 rule is 12 months to the accounting date so as that will be 5th April there is no Overlap.
Kind regards, Tim
PS Are the CT rules that you must account for at least 365 days in Year 1? I used to know that sort of thing lol
For my case, is this not true: For tax year 13/14, regardless of when I set up the compnay I should be registered with HMRC by 5th Oct. (I couldnt find time limit as to how soon you have to register with HMRC after setting up as long as its done by 5th Oct) This is the case with us. She set up in Aug 13 as sole trader and registered with HMRC. Therefore can we not say that we have decided that our accounting period is from April to April same as tax year.
And that simply there was no activity during April to July 13?
I think that's the statement we've picked up on in isolation. Agreed, you're right to ring alarm bells over basis periods but if I'm reading it correctly there is no period that is taxed twice. The basis is the tax year itself including the year of commencement.
Year 2 rule is 12 months to the accounting date so as that will be 5th April there is no Overlap.
Kind regards, Tim
Hi Tim,
I think that I can see where our confusion lies and as usual we not disagreeing but simply saying the same thing in different ways.
Does the line emphasised in blue not imply that the taxpayer has already changed their basis period to align it with the tax year.
The reality that both of us would go for here (and what the original poster wants to do) is to change the period to align to the tax year in the self assessment for the 14/15 tax year (the next one) using an SA103F.
The confusion is because the first part of my original reply relates to the accounting date still being August. If the date is changed to April then there are as you state (and I thought that I had implied but my appologies if it reads differently to as intended) no overlaps profits to consider (there aren't anyway but we're really talking theory here more than the specific case).
kind regards,
Shaun.
p.s. on the other question, as you know the accounts filed with CH for an incorporated business can be longer than twelve months but for tax purposes the period covered cannot be longer than 12 months (although it can be less).
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I have always made the year end 31st March for all clients to avoid the overlap and avoided the double taxation. Why would anyone want HMRC to hold your money up until the day you decide to cease trading?
I will stand corrected but I don't think Year 2 going to 5th April 2015 would be regarded as a notifieable change of basis -- the assessment is merely following the general rules for the second accounting period.
In fact the accounting date (to 5th April) is the same in 2013/14 and 2014/15.
Sorry about the delay but it's given me a chance for a flick through fl Memo and my quick reading of s215 ITTOIA backs up my instinct that this isn't a change of basis.
I bet there's been umpteen replies since i started typing lol
If you're taxed twice EG. on profits from say, December to March at commencement then, as likely as not these profits will be lower than going the tax year route. Generally profits rise as a business becomes established so if you delay reporting a few months until the following year, you are actually getting free credit from HMRC.
Just declare self employment income from Aug 13 to Mar 14 on the 2013/14 tax return then on the 2014/15 tax return declare income from Apr 14 to Mar 15. Avoids all the issues with overlap relief.
Are you sure that you can choose to simply ignore basis periods Mark?
Yeah you can choose your first period to be whatever you want.
I would never advise a client to make it anything other than 31 March or 5 April, unless they had a particular reason not to choose, as it avoids the issues with overlap relief etc.
I am also in the process of getting all limited company clients to change their year end to 31 March so it ties with the tax year so it syncs with payroll year end, personal tax return year end and P11d year end. Makes the accounts work and dividend calculation so much easier.
my issue though was that the poster had already chosen their first period and informed HMRC of that start date so to my mind alteration now is a change of basis period even though it's the first return.
like yourself, for the self employed I always try to get them to match their accounts to the tax year.
I don't have the same issue with incorporated entities as I always feel that it helps to emphasise to directors that they are not the company... And of course it also spreads out the workload a little if we have a good spread across the year.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
