Quick tax return quezzy!

[jezaff]

Tweet

Quick question from a 1st time returner!

The form seems more straight forward than I imagined - phew! So for me it is pretty straight forward. Costs: hosting and domain names. Income: Google and Amazon. The numbers aren't big, I can do it in my head !

Should I just include any income that reached my account by the end of the year? Amounts that are accrued but unpaid are accounted next time?

Anything else obvious I have missed? I am not interested in trying to claim my house is an office or something like that. I work on the train !

As an aside, I was thinking about publishing an Amazon wishlist on a site where I release some free CMS plugins (I feel uncomfortable accepting payment for my amateur coding efforts!) for those that have expressed interest in saying thanks for my efforts. Are such "gifts" taxable?

[hrbs]

Quick question from a 1st time returner!
Should I just include any income that reached my account by the end of the year? Amounts that are accrued but unpaid are accounted next time?

Hi

You need to include all commissions earned but not yet received. If you have a history of reversals/returns then you can take that into account eg if over the last few months you have had 5% reversals, reduce your accrued income from that network/merchant by 5%. Alternatively you could wait until end of May before submitting your tax return as you should have the actual figures available by then.

Depending on your billing cycle you may have also incurred expenses before the year end which were not paid/billed until later. If they relate to the tax year they can also be accrued as costs in your accounts.

If you also have a fulltime job and receive benefits in kind (eg health insurance), then your employer will need to provide you with a P11d. As the HMRC deadline for these is 6 July, many employers do not provide them to their employees until end of June.

HMRC guide to filling in the self employment section is at http://www.hmrc.gov.uk/helpsheets/hs222.pdf .

"To arrive at the profits it is necessary to draw up accounts using the methods which accountants have developed for dealing with income that has been earned but not received, expenses which have been incurred but not paid or paid but not fully used, and so on. And the profits arrived at using these methods (the commercial profits) have to be adjusted for tax purposes. This is because in arriving at the commercial profits some items of income or expense may be recognised as not taxable or tax deductible, and other special allowances may reduce the amount of profits which are taxable."

It also includes guidance on the Annual Investment Allowance and the capital allowance rates for 2008/09 as the writing down allowance rates changed with effect from 6 April 2008 (see page 9 of the helpsheet).

With regards to tax deductble expenses, read my guide at http://tips.hrbs.biz/running-your-bu...ible-expenses/ as you may be able to claim more than hosting and domains. (quicklink http://hrbs.biz/id?10102)

I will be adding a capital allowance guide over the next week or so.

Regards

Keith
http://HRBS.biz

[accelerator]

1) Should I just include any income that reached my account by the end of the year? Amounts that are accrued but unpaid are accounted next time?

2) As an aside, I was thinking about publishing an Amazon wishlist on a site where I release some free CMS plugins (I feel uncomfortable accepting payment for my amateur coding efforts!) for those that have expressed interest in saying thanks for my efforts. Are such "gifts" taxable?

1) Yes and Yes.

2) My own unresearched view would be that such gifts/donations to show appreciation for a free service would be taxable. Effectively the people making a donation have decided that your service is worth paying for, and therefore in these cases it is in fact a paid service. This is just a guess but I can't see the tax office thinking any differently.

Rgds

[jezaff]

Thanks for the feedback guys, very useful and I need to do a bit more reading and calculating it seems!

One other question... I guess the class2 NI I have been paying counts as an expense? That would sound logical to me but you never know. It seems there is a max amount of NI you need to pay overall, is there an obvious threshold, ie as a high rate tax payer I already pay a load from my day job lol! I think they will work this one out for me - they keep sending me a "you might be pating too much NI" forms.

I must admit I find some of the rules hard to interpret. And I studied Quantum Mechanics at uni lol. I have a new found respect for accoutants .

Anyways just got my P60 through so will start things going!

[hrbs]

One other question... I guess the class2 NI I have been paying counts as an expense?

No it is a personal bill and not tax deductible. In your accounts it would be included in your drawings figure.

Re NI You could consider applying for class 2 and 4 deferment if you meet the criteria from your day job. The 2009/10 form is at http://www.hmrc.gov.uk/nic/ca72b_12_08.pdf and guidance notes at http://www.hmrc.gov.uk/nic/ca72b_notes_12_08.pdf .

Keith
http://HRBS.biz

[jezaff]

Thanks again for the pointer. I keep going from "this seems simple" to "this seems impossible". I guess its just a case of doing the background reading. And to think this is a reasonably simlple case. Will definitely consider some professional help if I get into this in a more serious fashion!

Cheers.