Starting a business can be a daunting task; I know as I’ve been there and done it. When I started out it was with the sole intention of earning enough income to live off without having to ever be employed again and answering to a boss. Everyone starts their business for their own personal reasons. Most often someone will consciously set up their business; other times a hobby can evolve into a business.
So when do you know you have a business?
You’d think there would be a clear and specific definition of what setting up a business or starting to trade actually meant.
No such luck! Like many things in accountancy and tax there are no definitive guidelines set down by HMRC.
That said it should be obvious to you if you have a business and are trading. Ask yourself are you undertaking activities designed to generate income and hopefully profit? Have you bought items to sell on for a profit? Are you creating something to sell? Are you offering services with a view to generate income? Has your hobby crossed the line from something you do for pleasure into something which is generating revenue?
If money starts to flow in don’t kid yourself that you are not trading. HMRC have many tools and techniques available to seek out those who have not registered as self employed or who have not declared income or profits. In this technological age this doesn’t mean an army of people sat in a room searching through web sites; rather they use bots and programs to do that grunt work.
So it’s better to register your business and declare your profits as soon as possible rather than have sleepless nights waiting for the taxman to come knocking!
The same applies to self employment income from Amazon or eBay or from multi-level marketing sources such as Avon, Pampered Chef or similar.
Keep the right side of HMRC from the start!