Invoicing and HMRC

[LX-Dave]

Recently, through a slightly chinese-whispered message, an accountant insinuated that if I am going to be invoicing 'regularly' I will need to register with HMRC... which I know almost nothing about.

 

Having searched the forum, and looked through the minefield of government and HMRC websites, I'm still none the wiser, so if anyone can help, it would be appreciated.

 

I am a full time student at sixth form, and am planning to go to university in september, but on occasion I provide services to local people in Lighting & Sound provision or operation, Graphic Design and Web Design, and invoice them accordingly, with a single 'job charge' each time (no hourly rates specified).

 

I am probably sending approximately 10 invoices per year, with a total of not more than £1000.

 

At what point is it a requirement for me to register with HMRC or whatever is involved?

 

If anyone can help to make this clearer it would be great :)

 

If I have missed anything important out I shall try my best to fill in!

 

Thanks in advance,

 

Dave

[David Lee]

You need to register with HMRC as a sole trader, self employed. It should be easy enough, phone them as they can be helpful. As you are only invoicing £1000 a year you will have no tax to pay but they need to know to set it against your tax code. I.e if you get a full time job then the allowances will be applied to your full time job and you will pay tax on your self employed work.

 

I don't think there is a lower limit. You need a Unique tax reference straight away and I am suprised that any companies contracting your services haven't asked for it (as well as your public liability insurance).

 

An important thing though - are you truely self employed or should they put you on a zero hour contract. It has massive implications.

 

Do you just provide services or do you provide equipment as well?

[paulears]

With that few invoices and low total income, you're probably best NOT to register as self-employed, because if you do you'll start to pay class 2 NICs which are soon changing from small regular ones to one or two larger payments. You need to just phone the revenue - my guess is they'll be quite happy you describing this as hobby income, which they often turn a blind eye to because the costs involved in processing it are more than the £200 they'd get from as the tax. Just include the income on your tax return self-assessment. If doing those jobs costs money too - maybe for odds and ends, or travel to get there - then remember you are only taxed on profit you make. Deduct reasonable expenses from the income, and consider this 'your income' from that little job. It's always best to keep proper records, in case they ever ask, but lots of people make a few quid from their hobbies or selling things on ebay, and casual income like this is easily accounted for on the self-assessment form.

 

If you are officially 'self-employed' then this could have implications for student loans etc. If you are a student, then you're a student with a bit of private income - NOT a freelancer. You still get the student benefits of the 'status' - so health services are free in full-time education. Being self-employed means you'd probably lose these - not certain, hence why you need to check. Last thing you want is to have to pay back your student loan before you've finished the course?

 

That's probably not what would happen - but I've a friend at college who has to pay for everything full cost because he's not considered a 'proper' student.

[LX-Dave]

I am suprised that any companies contracting your services haven't asked for it (as well as your public liability insurance).

As far as I know, all my clients are individuals rather than companies, however some contacts have been invoiced by my father's company, where I subsequently invoice him.

 

An important thing though - are you truely self employed or should they put you on a zero hour contract. It has massive implications.

Could you explain what this means? (or point me to a link...)

 

Do you just provide services or do you provide equipment as well?

For live event stuff I generally provide and operate my own equipment, or operate other equipment, but never dry-hire.

 

 

Dave

[David Lee]

Sorry bit vague. Self employment means you are running it as a business with you as the only employee. HMRC are pretty strict about who they consider are selfemployed - alot of freelancers really don't fit into that description...

 

Zero hour contract means that you are on the pay roll of the company but they have no obligations to give you set hours of work. What we used to call casual labour. They phone you when they need you. They will sort out the tax etc, provide saftey kit, training and insurance.

 

I think Paul is right and you are hobby invoicing. I have no experience of this so will defer to his view that you should not set up as self employed. I certainly agree that you should keep reciepts.

 

Although not part of the original post, please think about insurances required. search for PLI on this forum as it comes up a lot.

[LX-Dave]

Just include the income on your tax return self-assessment.

 

I wasn't aware I should be providing one of these... since I'm not paying tax?

 

Dave

 

 

 

[kerry davies]

David B, yes it is a can of worms and I know little about educational benefits, see your course leader (C.T.?) for that.

Though Paul is right that it would probably be best not to register, the Small Earnings Exemption from paying NIC should apply to you, if and when you did decide to do so. http://www.hmrc.gov.uk/forms/cf10.pdf

The self-assessment helpline is 0845 900 0444, and as all have said they don't bite. They have saved me plenty. By the time you deduct allowable expenses you almost certainly are not 'earning' anything, anyway. £20 a week wouldn't cover renting the space for your kit in Mum's garage. Nudge!

 

Just make sure that someone is covering you PL insurance wise, that you don't 'pay' anyone else for giving you a hand and that any vehicle insurance covers your kit. Try not to 'launder' invoices through Dad's firm, unless he is treating you as a sub-contractor.

 

Oh, and leave the bow and arrow at home, I'm in Hereford fairly often!

[paulears]

Just to back up what Kerry says about talking to them. They're in a real mess, staffing wise, so they don't actually want extra work, so you get proper advice. One thing to watch is that they are wary of giving absolute decisions - so they couch their advice carefully. They ask questions, you explain then say things like "based on the example you've given me, we would probably agree this seems a sensible solution" - so not quite a yes, but a pointer.

 

There are lots of people with income who don't have to worry about it - While I'm at panto and the house was empty bar my wife, the local theatre asked if I knew any local digs - so I said I could probably help out. I wasn't sure how this income would impact on my own accounts, so called them. They explained that my wife could go up to a certain figure for letting a room without any bother at all - so the income she got from that doesn't need to be taxed in any way at all. I'd not realised that - so their advice is quite unbiased. If you don't NEED to pay them tax, they actually don't want it!

[Junior8]

Just include the income on your tax return self-assessment. If doing those jobs costs money too - maybe for odds and ends, or travel to get there - then remember you are only taxed on profit you make. Deduct reasonable expenses from the income, and consider this 'your income' from that little job. It's always best to keep proper records, in case they ever ask, but lots of people make a few quid from their hobbies or selling things on ebay, and casual income like this is easily accounted for on the self-assessment form.

 

That's good advice but for goodness sake declare it somewhere - sometimes HMRC trace invoices back to the issuer if they are doing a tax inspection - and it is income. As far as records are concerned keeps copies of the invoices which you should number. Buy a little cash book use one side of the two page spread for income, write the invoices in as you issue them, and the other side for expenditure. It is far more important that you check your public liability situation when providing some services.

[zonino]

Sorry bit vague. Self employment means you are running it as a business with you as the only employee. HMRC are pretty strict about who they consider are selfemployed - alot of freelancers really don't fit into that description...

 

Erm, no it doesn't.... self employment means that you work for yourself and there is a single legal entity involved other than the recipient of the product

 

What you have described is an individual working through a Service Company - the Company contracts the work, and then has an employee-employer relationship with the individual - two legal entities involved other than the recipient of the product.

 

And yes, HMRC is pretty strict, guidance notes here for the film industry: http://www.hmrc.gov.uk/specialist/fi_guidance_notes2003.pdf which has similar issues

[pisquee]

I would say, although you are earning so little, especially when taking off expenses, that you definitely need to keep copies of invoices, and a records (receipts) for expenses etc. Have a nice spreadsheet with it detailed, and keep your bank statements. This way if you are ever queried on it, you can prove that your earnings were in fact low enough to not need to pay tax.

I'd also say you should do a self assessment form, as part of the above to show you are earning, but not enough.

 

As also said, you need to make sure you have adequate PLI, and as this doesn't come cheap, (remember - put it down as a business expense) ask yourself whether you have enough income to cover the expense of the PLI, and then whether your 'business' is actually viable.

[Jivemaster]

If work begins then consider the liability aspects. If you are a sole trader you are totally liable for all incidents and costs.

 

See whether you can be an employee for as long as possible, that way your employer is responsible for your actions, and that should be insured by them.

 

While you have little experience you are a wildcard risk for an insurer so the fee may be too high to afford, as you get more experienced then the insurance issue gets easier. Also watch your status when you want to be a student you really NEED to get all the financial help that is available.