Self Employment start up checklist?

[bitemarx]

I have a new job (starting last week of August) which essentially requires me to be self employed. I have decided to register with HMRC right away, since they will presumably take time with their work.

Can anyone advice me on what I need to be careful about in this venture?

I've contacted a tax accountant who said I only need to contact him next year. :-[

 

Are there any basic set-up processes that I need to do in order to be sef employed?

[slick132]

Hi Bitemarx,

 

Things are so different now compared to 10 or 20 years back. You can file your own accounts and tax return easily if you are competant and knowledgeable. Registering with HMRC is fine just now but not essential.

 

To enable us to give best advice, can you tell us :-

 

1. The type of business you are in.

 

2. The turnover you think you may achieve in the next 3 months and the next 12 months. 

 

3. Did your tax accountant suggest the date you should make your first accounts up to.

 

In the meantime, just ensure you keep records of all income and expenditure. Keep all receipts that you get too.

 

I use a simple spreadsheet to record all income and expenses, using a different "code" for each type of "revenue" expense such as advertising, motoring, materials, bank charges, insurances, etc. Dealing with values of "capital" expenditure is sightly more complicated - instead of claiming the full cost or value of a vehicle or machinery, you claim Capital Allowances for their depriciation.

 

More important, perhaps, is whether you are likely to be earning enough to be involved with VAT. The present threshold is £85K pa as a guide but the quartely totals are relevant too.

 

Come back with answers and we can say if you would be ok handling things yourself, or if you'll benefit from an accountant/tax advisor.

[taxhelper]

bitemarx - one thing that worries me about this is your statement that the person/organisation hiring you has demanded that you work as self employed.

You are either self employed or employed. Fact. it's not a "choice". If the manner in which you work indicates that you are employed then that is what you are.

 

If you work in a situation as self employed whereas, in reality, you are actually employed then you could be on dodgy ground. You ought to seek proper professional advice from a chartered tax advisor (CTA). Not someone who tells you to "come back later". What tax advisor would say that? Are they qualified? Sounds very unprofessional and unhelpful to me.

You need proper guidance.

Edited July 30, 2020 by taxhelper

[honeybee13]

taxhelper has a point. The government website has advice on what your employment status is, it's worth checking it.

 

https://www.gov.uk/employment-status

 

Let's hang fire on tax advisers until we see if this becomes clearer.

 

HB

[bitemarx]

On 30/07/2020 at 00:49, slick132 said:

Hi Bitemarx,

 

Things are so different now compared to 10 or 20 years back. You can file your own accounts and tax return easily if you are competant and knowledgeable. Registering with HMRC is fine just now but not essential.

 

To enable us to give best advice, can you tell us :-

 

1. The type of business you are in.

 

2. The turnover you think you may achieve in the next 3 months and the next 12 months. 

 

3. Did your tax accountant suggest the date you should make your first accounts up to.

 

In the meantime, just ensure you keep records of all income and expenditure. Keep all receipts that you get too.

 

I use a simple spreadsheet to record all income and expenses, using a different "code" for each type of "revenue" expense such as advertising, motoring, materials, bank charges, insurances, etc. Dealing with values of "capital" expenditure is sightly more complicated - instead of claiming the full cost or value of a vehicle or machinery, you claim Capital Allowances for their depriciation.

 

More important, perhaps, is whether you are likely to be earning enough to be involved with VAT. The present threshold is £85K pa as a guide but the quartely totals are relevant too.

 

Come back with answers and we can say if you would be ok handling things yourself, or if you'll benefit from an accountant/tax advisor.

 

Hi Slick,

 

Thanks for your reply.

 

Answers as best I can, at this stage:

 

 

 

1. The type of business you are in: Private dentist (part time)

 

2. The turnover you think you may achieve in the next 3 months and the next 12 months : Have no idea tbh due to COVID-19 reducing the patient numbers, but I expect it will be at least 2 - 2.5k per month

 

3. Did your tax accountant suggest the date you should make your first accounts up to - he said I have until Jan 2022 to file my self assessment not much else.

 

I expect my earnings to increase after six months or so when hopefully dentistry returns to normal. I also plan to undertake more income generating procedures with an aim of levelling off monthly turnover at or around £4500 pm.

 

 

use a simple spreadsheet to record all income and expenses, using a different "code" for each type of "revenue" expense such as advertising, motoring, materials, bank charges, insurances, etc. Is there a template for this??

 

Dealing with values of "capital" expenditure is sightly more complicated - instead of claiming the full cost or value of a vehicle or machinery, you claim Capital Allowances for their depriciation.  Totally over my head, and this is why I feel I'd be better off with a tax accountant.

 

More important, perhaps, is whether you are likely to be earning enough to be involved with VAT. The present threshold is £85K pa as a guide but the quartely totals are relevant too.  I doubt I will come close to that level of yearly earnings in the current or next tax year!

 

Come back with answers and we can say if you would be ok handling things yourself, or if you'll benefit from an accountant/tax advisor.

 

I have heard about accounting apps for self employed people... are these any good? Would you recommend any?

[bitemarx]

12 hours ago, taxhelper said:

bitemarx - one thing that worries me about this is your statement that the person/organisation hiring you has demanded that you work as self employed.

You are either self employed or employed. Fact. it's not a "choice". If the manner in which you work indicates that you are employed then that is what you are.

 

If you work in a situation as self employed whereas, in reality, you are actually employed then you could be on dodgy ground. You ought to seek proper professional advice from a chartered tax advisor (CTA). Not someone who tells you to "come back later". What tax advisor would say that? Are they qualified? Sounds very unprofessional and unhelpful to me.

You need proper guidance.

Thanks for your reply. 

I am not being forced to be self employed. It's just the nature of the industry that all of us are self employed. Only very few dental corporates have salried (employed) dentists positions.

This is a bone of contention between the HMRC and dentists, as far as I;ve read about it. In reality, though, all associate dentists are either self employed or working via an LLC. But a careful look at the nature of employment shows it to be more of an EMPLOYED position than a SELF EMPLOYED one. :-(

 

[bitemarx]

11 hours ago, honeybee13 said:

taxhelper has a point. The government website has advice on what your employment status is, it's worth checking it.

 

https://www.gov.uk/employment-status

 

Let's hang fire on tax advisers until we see if this becomes clearer.

 

HB

 

Thanks for your reply.

 

The info on the link would indicate that I'm self employed, except for a few points that contradict this.

[honeybee13]

Can you tell us what contradictions there are please? They could be important.

 

HB

[slick132]

Hi BM,

 

From your replies, I think you should get an accountant or tax advisor but NOT the one you have seen already. They really didn't seem interested enough.

 

Speak to family, friends or work colleagues to see if someone can recommend an accountant/ tax advisor they're happy with. You should get a free initial meeting when you can ask a few Q's and see who impresses you most.

 

They should also be able to give you an estimate to compile business accounts and/or file your tax return.

 

Although there are many Apps that can help you with book-keeping, I think you will benefit from advice about how to keep records of income and expenditure, picking an annual accounting date and then having the data processed to make your annual tax returns.

[bitemarx]

2 hours ago, slick132 said:

Hi BM,

 

From your replies, I think you should get an accountant or tax advisor but NOT the one you have seen already. They really didn't seem interested enough.

 

Speak to family, friends or work colleagues to see if someone can recommend an accountant/ tax advisor they're happy with. You should get a free initial meeting when you can ask a few Q's and see who impresses you most.

 

They should also be able to give you an estimate to compile business accounts and/or file your tax return.

 

Although there are many Apps that can help you with book-keeping, I think you will benefit from advice about how to keep records of income and expenditure, picking an annual accounting date and then having the data processed to make your annual tax returns.

Thanks, Slick. I suppose I ought to shop around for a tax accountant. Will get on this on Monday and see what the options are; I worry about corporate tax accountat firms because I have seen my (ex) wife struggle with one whilst she was contracting for a short while. The accountant was NO HELP whatsoever and the ex ended up doing most of the paperwork and filling in forms, etc.

 

 

[slick132]

That's why I said to ask around, particularly work colleagues, to see who they are happy to recomend.

 

Doesn't matter if they're a small local tax adviser, accountant, medium sized practice, whatever - personal recommendation is a good way to start.

 

Once you know how to record items properly, with a spreadsheet or an App, you may be able to complete your own tax return or at least save money by doing as much work as you can before passing it on to the advisor/accountant.

[bitemarx]

17 hours ago, honeybee13 said:

Can you tell us what contradictions there are please? They could be important.

 

HB

Checking if they’re exempt from PAYE

Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:

• they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit TRUE
• they can decide what work they do and when, where or how to do it FALSE
• they can hire someone else to do the work TRUE
• they’re responsible for fixing any unsatisfactory work in their own time TRUE
• their employer agrees a fixed price for their work - it doesn’t depend on how long the job takes to finish TRUE
• they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work FALSE
• they can work for more than one client TRUE

 

Checking their employment rights

Someone is probably self-employed and doesn’t have the rights of an employee if they’re exempt from PAYE and most of the following are also true:

• they put in bids or give quotes to get work N/A
• they’re not under direct supervision when working TRUE
• they submit invoices for the work they’ve done FALSE
• they’re responsible for paying their own National Insurance and tax TRUE
• they don’t get holiday or sick pay when they’re not working TRUE
• they operate under a contract (sometimes known as a ‘contract for services’ or ‘consultancy agreement’) that uses terms like ‘self-employed’, ‘consultant’ or an ‘independent contractor’ UNSURE ABOUT THIS; WILL GET CONTRACT NEXT WEEK SO WILL KNOW MORE

Sorry for the caps and the copy paste. Just seemed the easiest way to do it.

[taxhelper]

I see. You appear to be under the associate agreement but everyone here knows that HMRC are reviewing ALL situations where someone claims to be "self employed". Dental practices are part of this review and HMRC have been actively looking into dental agreements for at least the last two years.

You must be very, very cautious about the agreement between you and the practice principal. When cases have come to court (often under employment law not specifically tax law) differing decisions have been made. Not all dental agreements are the same.

The manner in which you and the principal work together may be the "nature of the industry", as you put it, but things can easily change. The definition of "employed" is under huge scrutiny by HMRC at the moment. 

You probably don't bill patients directly for  the dental services you provide to them, most likely you don't use your own equipment/tools/materials to carry out your work (a basic staple of all self employed workers) and you say you don't issue invoices for your work (again, a basic staple of self employed workers).

 

You also say you are allowed to hire someone else to carry out your work. This is called the "right of substitution" but, unless this actually happens, and you pay someone yourself to carry out your work, then HMRC will disregard this self employment indicator.

If you are working under a standard agreement you are also probably obliged to turn up for work to the surgery during times stipulated by the practice principal and are paid on a rolling monthly basis (less contributory costs to running the practice).

You can see how this is a minefield especially in light of any future HMRC decision.

All that said, if that's how you are required to work, and HMRC are not challenging it right now, then I guess you will carry on but I would still urge you to get specialist TAX advice for this. How to keep records of your business income and expenditure will be straightforward but the tax issues may be fraught with danger.

Good luck with everything.

[ericsbrother]

there are different classes of employed peopel, there are employees adn there are "workers". You appear to be the latter

Now what make this the case? you have 1 place of work and you cant decide what hours you work etc. You have you tools of the trade supplied ( well to a point, they supply some of them,  I presume you wont be asked bring your own chair).

Many GP's are in the same bracket so have a chat to one

[bitemarx]

I've had a chat with several dentists and apparently they;re ALL either self employed or LLC! Despite all of them working in one fixed address and "tools" etc supplied by the employer. 

 

I'm hoping the HMRC wont be penalising ALL dentists for being self employed.....in any case, I;m going with the rest of the crowd and using the self employed route.

[taxhelper]

Thought you might. Well, you are now aware of what HMRC has in their minds so you are at least forewarned.

Good luck with it all. Just make sure you keep some sort of spreadsheet etc for your income and expenses. It's your call how simple or complex your records are.

Remember the object of this - you are signing a Tax Return that you can substantiate is as accurate as it can be to "the best of your knowledge and belief".

[bitemarx]

Agreed. I tend to be meticulous in such things, so hopefully I will be able to stick to that!

 

It just sounds like a ticking bomb.....

[taxhelper]

Ticking time bomb is spot on.

HMRC have already challenged various sectors of the economy, and their "self employed" assertions, including the TV/film industry, agency workers, plumbers and other areas of the construction industry.

Their examinations are not likely to stop any time soon so keep it in mind.  

Stay safe.

[slick132]

Just to add some balance to the picture, as Taxhelper says, HMRC has focused on various sectors over many years, with a view to getting workers onto PAYE if they really are employees.

 

However, you're unlikely to be in any trouble when you are doing what thousands of other dentists do. HMRC are likely to change things by giving new orders to the companies that "employ" you.

 

Keep good records of all that you receive and spend and find a recommended advisor to help you with recors/accounts and tax return.

[bitemarx]

Hi everyone,

Is there any advantage to becoming an LLC over being self emplloyed?

I do not make a huge amount of money tbh, since I only work two or three days a week under the current circs, but I'm planning to expand into dermal fillers and botox and such, so I wondered if its worth incor[prating as LLC

 

 

[honeybee13]

Hi. Have you googled this? I don't want to post a link because I don't want to recommend anyone, but there are lots of accountancy firms out there whose websites tell you what the difference between LLC and self-employed is in practical terms.

 

HB

[bitemarx]

3 minutes ago, honeybee13 said:

Hi. Have you googled this? I don't want to post a link because I don't want to recommend anyone, but there are lots of accountancy firms out there whose websites tell you what the difference between LLC and self-employed is in practical terms.

 

HB

 

3 minutes ago, honeybee13 said:

Hi. Have you googled this? I don't want to post a link because I don't want to recommend anyone, but there are lots of accountancy firms out there whose websites tell you what the difference between LLC and self-employed is in practical terms.

 

HB

I will Google it, I guess.

 

There are TOO MANY websites giving info. haha

[taxhelper]

Research is important. I agree there are many sites offering information and, sorry to make matters worse (possibly), but, if you do form a limited company you also need to keep an eye on "disguised employment", "IR35" implications.

Again there are many sites offering advice and explanations about IR35 but, in essence, this is the basics of it .....

IR35 for Dummies. It’s hard to go on Linkedin these days… | by Genesis | Medium

[bitemarx]

On 30/11/2020 at 12:23, taxhelper said:

Research is important. I agree there are many sites offering information and, sorry to make matters worse (possibly), but, if you do form a limited company you also need to keep an eye on "disguised employment", "IR35" implications.

Again there are many sites offering advice and explanations about IR35 but, in essence, this is the basics of it .....

IR35 for Dummies. It’s hard to go on Linkedin these days… | by Genesis | Medium

Thank you for the link.